cost modelling: another dimension in project planning and control - dr paul wood
TRANSCRIPT
Cost Modelling: Another Dimension in Project Planning and Control
Dr Paul Wood
BMT Group
• An international network of subsidiaries providing engineering, design and risk management consultancy
• Wholly independent partner providing customers with access to expertise around the globe
• Heritage of research and technology which drives significant ongoing investment in R&D and development of future talent
• Formed in 1985 through Government privatisation of maritime research and technology organisations
• Held in beneficial ownership for the staff
• 2011 turnover £140 million
• 1300 staff in 22 subsidiary companies (60 Offices) in 23 countries in Europe, North America and Asia
BMT Hi-Q Sigma Overview
• A professional services company compromising of 90 consultants across offices in Bath, Basingstoke and London.
• Operating across the Defence, Energy and Transportation sectors.
• Achieved a turnover in 2011 of ~ £12M.
• As an employee benefit trust with no manufacturing or supply chain interests, we provide truly impartial advice, assistance.
• In the complex world which we know you face every day, our goal is simple and steadfast:
to bring clarity
BMT Hi Q Sigma Services and Capabilities
• We help to deliver complex programmes through the integration of programme management and systems engineering.
We help you achieve clarity through:
• Strategic guidance to organisations in the establishment and management of programmes
• Interventions to optimise existing programmes/projects
• Provision of quality people as interim support
Risk and Opportunity Management
Investment Appraisal
Project Controls and
EVM
Enterprise Architecture
Requirements Definition
Training and Mentoring
Business Planning and Forecasting
Business Process
Management
Portfolio Management
Planning and Schedule
Management
Feasibility Studies and
Due Diligence
Project Diagnostics
Strategic Guidance
Project Optimisation
Interim Support
Enabling Successful Programmes
Aim
1. Identify the touch points between Cost Estimating, Scheduling and Project Controls.
2. Understand the mutual benefits of interfacing the processes.
3. Understand the long term benefits that can flow between similar projects.
Agenda
1. Cost Model Process/Techniques 2. Learning Cycle 3. Project Life Cycle 4. Touch Points between the processes 5. Common problems in Cost Modelling 6. Benefits of working together 7. Questions
Cost Model Process • Agree Assumptions with customer
• Identify Data Sources (with customer)
• Data Collection (including risks)
• Model Development
• Model Verification & Validation
• Analysis
• Report
Project boundaries
Same sources?
Shared meetings?
Check schedule
Schedule
Analysis
Shared report?
Cost Model Techniques • Top Down
• Historical Trend Analysis
0
20
40
60
80
100
120
140
160
180
200
1890
18
95
1900
19
05
1910
19
15
1920
19
25
1930
19
35
1940
19
45
1950
19
55
1960
19
65
1970
19
75
1980
19
85
1990
19
95
2000
20
05
2010
20
15
2020
20
25
2030
20
35
2040
20
45
2050
20
55
2060
20
65
Cost (£M)
Cost (£M)
Linear (Cost (£M))
Cost Model Techniques • Top Down
• Historical Trend Analysis • Analogy (“It is like one of these”) • Parametric (Pattern backed up by statistics)
• Bottom Up • Cost and Resource Breakdown Structure (CRBS) • Weight Groups – NES 163, Brown Book and ANEP 42 • Expert Opinion • Extrapolation (closer to Parametric (at the system level))
Learning Cycle
Planning
Doing
Reviewing
Learning From
Experience (LFE)
Vision
Project/Product Life Cycle
Concept Definition
Implementation Handover
Operations Disposal/ Termination
Time (not to scale)
Culture
Business Case
Project Plan
PPE/LFE
Project Life Cycle
Concept Definition
Implementation Handover
Operations Disposal/ Termination
Time (not to scale)
Culture
Business Case
Project Plan
PPE/LFE
Project Close Out
X XX
Project Activities Concept Definition Implementation Handover
Time (not to scale)
Culture
Business Case
Project Plan
Vision Planning Doing Reviewing
Learning From Experience
Top Down Bottom Up Actual Costs are Evolving
Cost Estimates Cost Knowledge
Cost Process
Scheduling/PMB Process
Develop Schedule Deliver against the PMB
Agree the PMB
Project Close Out
Learning Cycle
Learning Cycle (Reality)
Planning1
Doing
Reviewing
LFE Vision1
Planning2
Vision2
Touchpoints
Project Phase Cost Schedule PMB Concept Manhours are estimated Solution is unknown, high level
schedules (dates of phases) Not yet agreed for whole project
Definition More robust manhours available to aid schedule; Risk info available
Schedule can be built using estimated manhours from cost model
PMB agreed; Risk info included
Implementation Feedback on actual manhours and material costs from Project Controls
Controlled as PMB Project delivered against PMB; Known costs and manhours fed back to cost modellers
Handover Milestone activity Controlled as PMB Milestone activity
LFE Learns from the PMB Learns from the Manhour cost model data and PMB data
Confidence is given from the learning from previous projects
Culture Culture is changed from LFE
Data providers have the same culture that has been cultivated during the cost model data collection
The culture change engendered as the cost model and schedule has developed.
6. Common Problems (costs)
• Collection of good data
• Estimates based on estimates and not always documented (increases errors)
• Risks are bolted on at the end of the process
• Schedule is determined later
• Lack of understanding of three point estimates and statistical analysis
• Costs in wrong year creates inflation errors (a better understanding of the schedule would help!)
Benefits of working together • Better understanding of common stakeholders
• Build on culture change as the project progresses
• Reduces stakeholder engagement time
• Improved communication
• Costs developed using manhours can be used to develop schedules (vice versa in the next project)
• Reduces the overhead of project planning (robust data available)
• Feedback loops can be used to make the cost model, schedule and PMB more robust on follow on projects
• Helps build a robust database of project data
Thank you