7.14. Key Terms

Activity: An element of work performed during the course of a project. An activity normally has an expected duration, an expected cost, and expected resource requirements.7.2.The process of further breakdown of the work package elements of the work breakdown structures (WBS).7.4

Alternative Analysis: This means considering several different options for how you assign resources. This includes varying the number of resources as well as the kind of resources you use. 7.8

Analogous Estimate: An estimate that is based on other project estimates. 7.9

Analogous Estimating: Uses information from a previous project to estimate the cost of completing a similar project in the future. This provides a quick estimate but should be used with caution. Analogous estimating only works when comparing projects that are similar in scope and will be completed in similar conditions.7.6

Budget: This is a decision made on the amount of money that will be spent on a project and how it will be spent.7.10

Budget Estimate: Budget estimates are used in project planning and can be within a range from -10 to +25 percent from the actual or final cost.7.6

Bottom-Up Estimating: This means breaking down complex activities into pieces and working out the resource assignments for each piece. It is a process of estimating individual activity resource needs or costs and then adding these up together to come up with a total estimate.7.8

Bottom-Up, or Micro, Estimation: Techniques are used when the project is approved or is very likely to be approved. Bottom-up estimation techniques generate estimates for individual work packages or sub-deliverables, which are then summarized to reflect total costs.7.6

Contingency Fund: This is a number of resources set aside to cover unanticipated costs.7.12

Contingency Plan: Which is a plan for addressing key possible obstacles to project success. As discussed in Ch. 6: Risk Management, a contingency plan defines alternate paths for the project in case various risks are realized.7.12

Cost: An expenditure, usually of money, for the purchase of goods or services 7.2

Cost Control Can be Maintained: The project can be measured through actual costs versus the approved budget.  This shows how the budget is progressing (ahead, behind, on budget.)7.10

Cost-Plus: Refers to a contract where a company is reimbursed for its expenses, plus earns a profit (in a percentage.)  It is sometimes called “mark up” or “profit margin.”  The full cost of the product is covered and a rate of return is guaranteed by the increase.7.9

Cost of Quality: You will need to figure the cost of all your quality-related activities into the overall budget. Since it’s cheaper to find bugs earlier in the project than later, there are always quality costs associated with everything your project produces. Cost of quality is just a way of tracking the cost of those activities. It is the amount of money it takes to do the project right.7.9

Definitive Estimate: Definitive estimates are generated as the project progresses and the variability of the estimate is reduced (see Figure 5-4). Definitive estimates are within a range from -5 to +10 percent from the actual or final cost. 7.6

Deliverables and Sub-Deliverables: These are things such as physical objects, software code, or events. In a WBS, deliverables and sub-deliverables are represented by nouns (see Figure 5-2) 7.5

Determination of Resource Cost Rates: People who will be working on the project all work at a specific rate. Any materials you use to build the project (e.g., wood or wiring) will be charged at a rate too. Determining resource costs means figuring out what the rate for labour and materials will be.7.9

Direct Costs: “An expense that can be traced directly to (or identified with) a specific cost center or cost objects such as a department, process, or product” (Business Dictionary, n.d.).7.9

Direct Project Overhead Costs: Costs that are directly tied to specific resources in the organization that is being used in the project. Examples include the cost of lighting, heating, and cleaning the space where the project team works.7.9

Duration: The amount of time to complete a specific task given other commitments, work, vacations, etc. Usually expressed as workdays or workweeks.7.2

Equipment: Equipment needs to be purchased, leased, or rented for the project.  It needs to be available when needed. 7.3

Expert Judgment: This means bringing in experts who have done this sort of work before and getting their opinions on what resources are needed.7.8

Financial Viability in a Direct Way to The Company: Increase the operating margin and improve overall project success 7.10

Fixed Price: This is the more predictable of the two with respect to the final cost, which can make such contracts appealing to the issuing party.7.9

Gantt Chart: A type of bar chart, developed by Henry Gantt, that illustrates a project schedule. Gantt charts are easy to read and are commonly used to display scheduled activities. These charts display the start and finish dates of the terminal elements and summary elements of a project. 7.7

General and Administrative (G&A) Overhead Costs: The “indirect costs of running a business,” such as IT support, accounting, and marketing” (Tracy, n.d., para. 1).7.9

Indirect Costs:  Expenses incurred to create a product/service that is not directly related to the project, yet are costs of the project.7.9

Learning Curves: Also known as improvement curves or experience curves are important when labour is one of our main resources.7.6

Materials: The materials required for the project need to be planned for in advance, ordered/brought in as needed in the project.  As well, delivery of products and timing of delivery need to be considered. 7.3

Milestone: A significant event in the project; usually completion of a major deliverable. An important distinction is that a milestone is a zero-duration activity; e.g., “acceptance of software by a client” is a milestone, preceded by many contributing activities.7.2

Network Diagram: A way to visualize the interrelationships of project activities. Network diagrams provide a graphical view of the tasks and how they relate to one another.7.7

Parametric Estimates (Ratio Method): Uses historical information or industry benchmarks as the basis for making an estimate. Parametric estimates are made by multiplying the size of a project by an established cost per unit.7.6

People: Providing enough qualified people on a project is the most important resource.  Human Resources would be active in supplying or supporting the hiring of qualified people for the project.  People are hired based on the skills they bring to the project. 7.3

Project Budget: A combination of all the activities milestones and tasks in the project plan; and the costs that the project must accomplish.7.10

Project Management Software: Such as Microsoft Project will often have features designed to help project managers estimate resource needs and constraints and find the best combination of assignments for the project.7.8

Published Estimating Data: Something that project managers in a lot of industries use to help them figure out how many resources they need. They rely on articles, books, journals, and periodicals that collect, analyze, and publish data from other people’s projects.7.8

Resource: Any personnel, material, or equipment required for the performance of an activity 7.2

Reserve Analysis: You need to set aside some money for cost overruns. If you know that your project has a risk of something expensive happening, it is better to have some cash available to deal with it. Reserve analysis means putting some cash away in case of overruns.7.9

Resource-Constrained:  There is an assumption that all the resources will be available when and where they are needed.  If the resources are not available or not adequate, the project could be delayed. 7.3

Resource Estimating: This is to assign resources to each activity in the activity list. There are five tools and techniques for estimating activity resources.7.8

Resource Management: The efficient and effective deployment of an organization’s resources when they are needed. Such resources may include financial resources, inventory, human skills, production resources, or information technology (IT).7.8

Rough Order of Magnitude (ROM): ROM estimates are made at the initiation of the project and can be +/- 50 percent from the actual or final cost.7.6

Secure The Funding: It tells the stakeholders exactly how much is needed to complete project 7.10

Single Point Estimation: Estimate obtained from just one estimator. This can work well with experienced estimators and work packages that are straight forward.7.6

Slack: Calculated time span during which an event has to occur within the logical and imposed constraints of the network, without affecting the total project duration. Or put more simply, slack, which is also called float, is the amount of time that a task can be delayed without causing a delay to subsequent tasks or the project’s overall completion date. 7.2

Three-Points Estimate: Instead of asking an estimator for just one estimate, a three-points estimate asks the estimator to provide three-time estimates for each activity. 7.6

Time-Constrained Resources: This would mean there is an imposed time frame for the project (the time cannot be changed.) 7.3

Vendor Bid Analysis: Sometimes you will need to work with an external contractor to get your project done. You might even have more than one contractor bid on the job. This tool is about evaluating those bids and choosing the one you will accept.7.9

Work Breakdown Structure (WBS): Hierarchical outline of all the deliverables involved in completing a project. The WBS is part of a project scope statement. The creation of a WBS is one of the first steps in organizing and scheduling the work for a project. 7.5

Work Packages: These are action-oriented and will be represented by phrases containing verbs (see Figure 5-2). 7.5