Planning Cycle

FIGURE 15-1. Phases of a management cost and control system.

• Plan and schedule work

• Identify those indicators that will be used for measurement

• Establish direct labor budgets

• Establish overhead budgets

• Identify management reserve

The project budget that results from the planning cycle of the MCCS must be reasonable, attainable, and based on contractually negotiated costs and the statement of work. The basis for the budget is either historical cost, best estimates, or industrial engineering standards. The budget must identify planned manpower requirements, contract-allocated funds, and management reserve.

Establishing budgets requires that the planner fully understand the meaning of standards. There are two categories of standards. Performance results standards are quantitative measurements and include such items as quality of work, quantity of work, cost of work, and time-to-complete. Process standards are qualitative, including personnel, functional, and physical factors relationships. Standards are advantageous in that they provide a means for unity, a basis for effective control, and an incentive for others. The disadvantage of standards is that performance is often frozen, and employees are quite often unable to adjust to the differences.

As a tool for measuring progress and controlling change, the systems must be able to:

• Measure resources consumed

• Measure status and accomplishments

• Compare measurements to projections and standards

• Provide the basis for diagnosis and replanning

In using the MCCS, the following guidelines usually apply:

• The level of detail is specified by the project manager with approval by top management.

• Centralized authority and control over each project are the responsibility of the project management division.

• For large projects, the project manager may be supported by a project team for utilization of the MCCS.

Almost all project planning and control systems have identifiable design requirements. These include:

• A common framework from which to integrate time, cost, and technical performance

• Ability to track progress of significant parameters

• Quick response

• Capability for end-value prediction

• Accurate and appropriate data for decision-making by each level of management

• Full exception reporting with problem analysis capability

• Immediate quantitative evaluation of alternative solutions

MCCS planning activities include:

• Contract receipt (if applicable)

• Work authorization for project planning

• Work breakdown structure

• Subdivided work description

• Planning charts

MCCS planning charts are worksheets used to create the budget. These charts include planned labor in hours and material dollars.

MCCS planning is accomplished in one of these ways:

• One level below the lowest level of the WBS

• At the lowest management level

• By cost element or cost account

Even with a fully developed planning and control system, there are numerous benefits and costs. The appropriate system must consider a cost-benefit analysis, and include such items as:

• Project benefits

• Planning and control techniques facilitate:

—Derivation of output specifications (project objectives) —Delineation of required activities (work) —Coordination and communication between organizational units —Determination of type, amount, and timing of necessary resources —Recognition of high-risk elements and assessment of uncertainties —Suggestions of alternative courses of action

—Realization of effect of resource level changes on schedule and output performance —Measurement and reporting of genuine progress —Identification of potential problems

—Basis for problem-solving, decision-making, and corrective action —Assurance of coupling between planning and control

• Planning and control techniques require:

—New forms (new systems) of information from additional sources and incremental processing (managerial time, computer expense, etc.) —Additional personnel or smaller span of control to free managerial time for planning and control tasks (increased overhead) —Training in use of techniques (time and materials)

A well-disciplined MCCS will produce the following results:

• Policies and procedures that will minimize the ability to distort reporting

• Strong management emphasis on meeting commitments

• Weekly team meetings with a formalized agenda, action items, and minutes

• Top-management periodic review of the technical and financial status

• Simplified internal audit for checking compliance with procedures

For MCCS to be effective, both the scheduling and budgeting systems must be disciplined and formal in order to prevent inadvertent or arbitrary budget or schedule changes. This does not mean that the baseline budget and schedule, once established, is static or inflexible. Rather, it means that changes must be controlled and result only from deliberate management actions.

Disciplined use of MCCS is designed to put pressure on the project manager to perform exceptionally good project planning so that changes will be minimized. As an example, government subcontractors may not:

• Make retroactive changes to budgets or costs for work that has been completed

• Rebudget work-in-progress activities

• Transfer work or budget independently of each other

• Reopen closed work packages

In some industries, the MCCS must be used on all contracts of $2 million or more, including firm-fixed-price efforts. The fundamental test of whether to use the MCCS is to determine whether the contracts have established end-item deliverables, either hardware or computer software, that must be accomplished through measurable efforts.

Two programs are used by the government and industry in conjunction with the MCCS as an attempt to improve effectiveness in cost control. The zero-base budgeting program provides better estimating techniques for the verification portion of control. The design-to-cost program assists the decision-making part of the control process by identifying a decision-making framework from which replanning can take place.

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Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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