Project Resource Management: Cost, Risk, and Quality
Project Resource Considerations
Projects always involve trade-offs between resources, schedule, human resources, costs, quality, and scope. Resources are limited, and Project Managers must recognize these limitations to avoid overpromising. People often constitute a large portion of the total project cost. Managing people is the most challenging aspect of a project. Resource availability, especially human resources, is a major constraint.
Resource Responsibilities on a RACI Chart
A Responsibility Assignment Matrix (RAM) depicts work packages and assigned resources. RACI is a popular form of RAM that presents roles of key stakeholders: Responsible, Accountable, Consult, and Inform. Agile teams decide among themselves who will do each activity.
Methods of Resolving Resource Overloads
- Reorder activities.
- Acquire or borrow additional resources.
- Reduce project scope or extend project schedule.
- Inform sponsor of severe overloads.
- Resource-level the overloaded person’s schedule.
- Assign activities to other workers.
- Split an activity: perform the first part as scheduled, delay the second.
Critical Chain Project Management (CCPM)
The Critical Chain Method modifies the project schedule by considering resource constraints. It allows the project team to place buffers on any project schedule path to account for uncertainty and limited resources.
Actions to Reduce the Critical Path
- Reduce project scope and/or quality.
- Overlap sequential activities.
- Partially overlap sequential activities.
- Increase work hours/days.
- Schedule activities at the same time.
- Shorten activities by assigning more resources.
- Shorten activities that cost the least to speed up.
Cost Management
Cost Management Plan Contents
- Costs included (internal, external, contingency, etc.).
- Activity resource estimating.
- Cost estimating.
- Cost baseline.
- Budget determination.
- Cost control, including metrics, reporting, and change approvals.
Cost Estimating
Cost estimating is the process of approximating the monetary resources needed to complete project activities.
Direct vs. Indirect Costs
Direct costs occur because of the project: direct labor, materials, travel, consultants, subcontracts, purchased parts, computer time. Indirect costs are not associated with one specific project: salaries, buildings, utilities, insurance, etc. These costs are allocated across projects.
Recurring vs. Nonrecurring Costs
Recurring costs repeat as project work continues, such as the cost of writing code or laying bricks. Nonrecurring costs happen only once, such as design development.
Regular vs. Expedited Costs
Regular costs are preferred. Expedited costs occur when the project must be sped up, such as overtime or expedited shipping. It’s vital to understand schedule pressures and resource demands when estimating costs.
Cost Estimating Techniques
Analogous Estimating uses values from previous similar projects. Parametric Estimating uses statistical relationships between historical data and other variables. Bottom-up Estimating aggregates estimates from lower-level work elements.
Reserve Costs
Management Reserve is for unknown possible costs, controlled by senior management. Contingency Reserve is for identified risks with developed responses.
Analyzing Reserve Needs
- Known Knowns: definite; estimate directly.
- Known Unknowns: may/may not occur; covered by contingency reserves.
- Unknown Unknowns: unexpected occurrences; covered by management reserve.
The Cost Performance Baseline is the approved project budget. Control Cost is the process of monitoring project costs and managing changes to the cost baseline.
Risk Management
Risk Management Plan
The Risk Management Plan describes how risk management activities will be prioritized, monitored, planned, and performed. It’s used for communication and follow-up analysis.
Root Cause Analysis
Root Cause Analysis is an analytical technique to ascertain the fundamental reasons that affect variances, defects, or risks.
Risk Register
The Risk Register contains the results of risk analysis, identifying all risks, including description, category, cause, probability, impact, responses, owners, and status.
Risk Analysis
Perform Qualitative Risk Analysis prioritizes risks by assessing their probability and impact. Quantitative Risk Analysis numerically analyzes the effect of risks on project objectives.
Common Quantitative Risk Analysis Techniques
- Decision Tree Analysis
- Expected Monetary Value (EVA) Analysis
- Failure Mode and Effect Analysis
- Sensitivity Analysis
- Simulation
Risk Strategies
- Avoid Risk
- Transfer Risk
- Mitigate Risk
- Accept Risk
- Research Risk
- Exploit Opportunity
- Share Opportunity
- Enhance Opportunity
Quality and Procurement
Fact-Based Management
Four aspects: understanding variation, deciding what to measure, working correctly with data, and using the resulting information appropriately.
Quality Management Plan
The Quality Management Plan describes how the project will perform in accordance with the quality policy.
Procurement Management Plan
The Procurement Management Plan describes how a project team will acquire goods and services.
Procurement Statement of Work
The Procurement Statement of Work documents the work to be purchased, in enough detail for potential suppliers to decide if they are capable and interested.
Contract Types
Firm-Fixed-Price (FFP) Contract
The seller completes the job for an agreed-upon amount, regardless of actual cost.
Firm-Fixed-Incentive-Fee (FPIF) Contract
The price is fixed, but the seller can earn an additional incentive for meeting defined project metrics.
Firm-Fixed-Economic-Price-Adjustment (FP-EPA) Contract
A fixed-price contract with a clause to protect the seller from conditions such as inflation.
Cost-Reimbursable Contracts
Cost-Plus-Fixed-Fee (CPFF) Contract
The buyer reimburses the seller for all allowable costs plus a fixed profit.
Cost-Plus-Award-Fee (CPAF) Contract
The buyer reimburses the seller for all allowed costs plus an award fee based on performance objectives.
Cost-Plus-Incentive-Fee (CPIF) Contract
The buyer reimburses the seller for allowable costs and pays a fee if the seller meets defined performance criteria.
Change Control
Change Control Process
A process where change proposals are acknowledged, documented, and approved or declined after review.
Change Control Board
A formal group authorized to review, evaluate, approve, delay, or reject changes to the project plan.
Monitor Project Risks
The process of tracking identified risks, identifying new risks, monitoring residual risks, and evaluating the effectiveness of the risk response process.
Transition Plan
A Transition Plan helps the customer use the project deliverables successfully.