Understanding Controi

Effective management of a program during the operating cycle requires that a well-organized cost and control system be designed, developed, and implemented so that immediate feedback can be obtained, whereby the up-to-date usage or resources can be compared to target objectives established during the planning cycle. The requirements for an effective control system (for both cost and schedule/performance) should include1:

• Thorough planning of the work to be performed to complete the project

• Good estimating of time, labor, and costs

• Clear communication of the scope of required tasks

• A disciplined budget and authorization of expenditures

• Timely accounting of physical progress and cost expenditures

• Periodic reestimation of time and cost to complete remaining work

• Frequent, periodic comparison of actual progress and expenditures to schedules and budgets, both at the time of comparison and at project completion

1. Russell D. Archibald, Managing High-Technology Programs and Projects (New York: John Wiley & Sons, 1976), p. 191.

Management must compare the time, cost, and performance of the program to the budgeted time, cost, and performance, not independently but in an integrated manner. Being within one's budget at the proper time serves no useful purpose if performance is only 75 percent. Likewise, having a production line turn out exactly 200 items, as planned, loses its significance if a 50 percent cost overrun is incurred. All three resource parameters (time, cost, and performance) must be analyzed as a group, or else we might "win the battle but lose the war." The use of the expression "management cost and control system" is vague in that the implication is that only costs are controlled. This is not true—an effective control system monitors schedule and performance as well as costs by setting budgets, measuring expenditures against budgets and identifying variances, assuring that the expenditures are proper, and taking corrective action when required.

Previously we defined the work breakdown structure as the element that acts as the source from which all costs and controls must emanate. The WBS is the total project broken down into successively lower levels until the desired control levels are established. The work breakdown structure therefore serves as the tool from which performance can be subdivided into objectives and subobjectives. As work progresses, the WBS provides the framework on which costs, time, and schedule/performance can be compared against the budget for each level of the WBS.

The first purpose of control therefore becomes a verification process accomplished by the comparison of actual performance to date with the predetermined plans and standards set forth in the planning phase. The comparison serves to verify that:

• The objectives have been successfully translated into performance standards.

• The performance standards are, in fact, a reliable representation of program activities and events.

• Meaningful budgets have been established such that actual versus planned comparisons can be made.

In other words, the comparison verifies that the correct standards were selected, and that they are properly used.

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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