Reader Q&A: The WBS and Cost
I wanted to share an email question I received through a Twitter contact of mine and my response. Feel free to chip in with your own insights!
photo by Tracy O
Question:
I hope you don’t mind me coming to you for advise and help with Project Management. I have this one question which I keep pondering on. In what way would you say that monitoring, planning and controlling project cost with a budget and organizing and planning a project using the WBS help or support one another?
Thanks!
My response:
Glad we connected on Twitter! In my projects, the WBS is one of the key things that helps me with planning and monitoring costs. The WBS is a prerequisite. When I have a WBS, I can look at it and see where I should have charge codes set up for project staff, and where I should be reporting project costs. Usually there is a specific level of detail that is relevant to various people. The sponsor may want to see costs at level 3 of the WBS, and I may be interested in a little more detail at level 4, and the other project managers who work with me may be looking at level 5. You may have specific stakeholders who only care about level 3 cost reporting for a particular element of the project, etc.
When putting estimates together, it’s important to first have a clear idea of what your scope is, and much of that comes from the WBS. Bucket your basis of estimates this way, schedule, etc. The iron triangle means that scope, cost, and schedule are integrated.
Monitoring and controlling your projects through status reports, EVM, etc. can really only done effectively by keeping in lock-step with your WBS structure.
Add your thoughts by leaving a comment for our reader below!
Mar 31st, 2009 at 11:13 pm
Twitter Comment
#kzreading – Reader Q&A: The WBS and Cost – from @pmstudent [link to post]
– Posted using Chat Catcher
Apr 1st, 2009 at 8:47 am
Hi Josh,
About the only fine point I would urge you to consider is the “iron triangle” is better known as the “Tetrad Trade Off” when you add quality along with time, cost and scope.
The reason for that should be clear enough. Quality has an impact on both time and cost. As in “you can have your project cheap and fast, fast and good or good and cheap, but you CANNOT have it fast and good and cheap”. Best example is taking your clothes into the dry cleaner…… 1 hour service can be done, but you are charged a premium and you won’t get any difficult stains removed. But if you can wait 24 hours, it will be cheaper and they can spend extra time on those tough stains…….
Given you are so keen on WBS and the link betwen costs, have you taken the time to investigate OmniClass yet? http://www.omniclass.org
Doesn’t mean much for IT guys, but with the proliferation of Building Integrated Modeling (BIM) it offers some pretty interesting challenges for the IT sector.
BR,
Dr. PDG, Heading to bed in Jakarta
Reply
Glen B. Alleman Reply:
April 6th, 2009 at 8:46 pm
Paul,
The current release of the Earned Value Intent Guide (EVIG) uses Cost, Schedule, and Technical Performance as the three dependent variables of project performance measures. The intent guide can be found at many locations – http://management.energy.gov/documents/NDIA_PMSC_EVMS_IntentGuide_Nov_2006.pdf – is one.
The notion of Faster Better Cheaper is alive and well in many domains. Cost as an Independent Variable (CAIV) (http://www.dau.mil/pubs/arq/2000arq/kaye.pdf) and Schedule as an Independent Variable (CAIV) (http://seari.mit.edu/documents/preprints/RICHARDS_RS608.pdf) is the basis of program management processes in space and defense.
Glen B. Alleman
VP, Program Planning and Controls
Denver, Colorado
http://www.lewisandfowler.com
Reply
Dr. Paul D. Giammalvo Reply:
April 6th, 2009 at 10:26 pm
Hi Glen,
Not sure what you are saying here. Isn’t “Technical Performance” a combination of quality and scope?
If you look at the requirements for EVM, they are:
1) Work was physically done (Scope and indirectly,Time)
2) Work was performed in substantial conformance to the specifications (Quality)
3) Work has fulfilled the contractual requirements (Contractual Shall Clauses)
So using the EVM as the basis for defining the “iron triangle” or “tetrad trade off” it becomes a little bit fuzzy as well.
Getting a little bit off track here, I was somewhat unhappy to see PMI stop making the distinction between Core and Supporting processes, which I think caused unecessary confusion. If we go back to the 1996 PMBOK, they still differentiated between Scope, Time, Cost and Quality (hence the Tetrad Trade Off) as core and Risk, Contracts, HR and Communications being supporting.
Just curious, getting back to the multiple sort capabilities, how many different ways are there to sort the elements of an aircraft? Is it only by Systems? Are there more than one sort fields?
BR,
PDG, Jakarta
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Glen B. Alleman Reply:
April 6th, 2009 at 11:29 pm
Paul,
May I suggest a read through the TPM materials at the referenced DoD site.
http://www.acq.osd.mil/pm/old/Old%20Papers/Papers%20-%20Govt/TPMs/tpm/index.html
Once through these and the material at
http://www.acq.osd.mil/pm/old/Old%20Papers/Papers%20-%20Govt/TPMs/tpm/tpmsover.htm
and the article at:
http://www.dau.mil/pubs/pm/pmpdf02/Nov_Dec/fer-jf3.pdf
I think it may become clear that “quality” is one of many attributes of a TPM and the notion of “performance based earned value,” as defined by Paul Solomon (www.pb-ev.com) is the basis of modern EVM processes used in US DoD.
The PMI PMBOK approach does not represent the approach used in DoD acquisition. The PMI approach sorely misses the forecasting capabilities of EV with absence of TPM’s connected to cost and schedule. Remember EV alone is “quantity.” Quality in the form of the TPM’s is needed to adjust the “work remaining,” to meet the planned maturity of the deliverable at the planned point in time.
Reply
Dr. Paul D. Giammalvo Reply:
April 9th, 2009 at 3:08 am
Hi Glenn,
Perhaps I am getting thicker in my old age, but given quality is clearly part of both our approaches, and given that in my original response I was advocating for the tetrad trade off rather than the iron triangle, you responses, while very complete, don’t make sense in the context of the original exchange between Josh and I.
What I am asking is “Do you agree or not that the tetrad trade off is “better” than the iron triangle?” Yes or no? If No, then why do you think the TPM approach is better than either of them?
Reply
Glen B. Alleman Reply:
April 9th, 2009 at 8:22 am
Paul,
I do not agree.
You’ve added an unnecessary dimension to the program control processes.
The US Federal Systems figured this out with the introduction of Techncial Performance Meaures – which I assume you have reviewed.
My intent was to introduce you to a simplifying paradigm that has proven useful in the managing complex and evolving programs in a variety of domains.
The suggested Tretrad introduces an unbalanced relation between dependent and independent variables. The result is poor topology, taxonomy, and ontologies when the variables are not of “equal” stature.
Quality, scope, and other “performance” parameters are “derived” from the TPM.
The result in the DoD domain is the application of Cost as an Indepedent Variable (CAIV) and recently Schedule as and Independent Variable (SAIV) for the “trade space” decision making processes needed to manage in the presence of emerging requirements and changes in the mission profile.
E.g. We’re not going to the moon, we’re only going to the Space Station, what are the available changes in cost, schedule, and techncial performance measures that can be made to preserve the over mission profile for the Orion spacecraft.
These are Systems Engineering questions intergated with Program Planning and Controls.
Glen B. Alleman
VP, Program Planning and Controls
Denver, Colorado
Reply
Dr. Paul D. Giammalvo Reply:
April 9th, 2009 at 8:41 am
Wow Glen……
Not sure how you think the addition of quality has added another dimension. Quality is in the TPM model as well.
Unless I missed something, it seems like TPM is nothing more than an agglomeration of performance metrics, quality being but one of them?
And what difference does it make if there is an unbalanced relationship between the dependent and independent variables? Are you saying that the weighting between the composite factors that make up the TPM are equal? Somehow, that doesn’t make sense to me.
Bottom line- I’ve read over the materials you sent and it seems to me that what is a fundamentally simple model has been made uneccesarily complex, but hey, I’m only a construction guy, not an aerospace guy…..
Have a great day…..
BR,
Dr. PDG, Jakarta
Reply
Glen B. Alleman Reply:
April 9th, 2009 at 8:21 pm
Paul,
Here’s a simple example of a TPM and how it impacts the performance measure.
At some point in the future, we are forecasting the mass of our spacecraft is less than 27 metric tons. 27 MT is a magic number, since that is the maximum mass that can be placed in Lowe Earth Oribit (LOE). The International Space Station and Hubble are in LOE.
At the beginning of the project, we forecast that at the Preliminary Design Review (PDR), we’ll need to know the mass to wihtin +20%/-10%. That is a Techncial Performance Measure. Of course at launch some time in 2014, we’ll need to know the mass much more accuratly beacuse we need to fuel the launch vehicle.
But PDR +25/-10 is considered GREEN in TPM terms.
Now when we get to PDR and we haven’t nailed the mass within that range, then the performance measures of our project – cost/schdeule – the earned value results need to be adjusted, as do the risk reitrement and buy down process (costing money and time), to get the mass back inside the error band as a result of the CAR (corrective action) resulting from the PDR.
We can’t be on schedule, and certaintly can’t be on budget if we didn’t meet the TPM.
At Critical Design Review (CDR), the tolerances on mass are tighter, so so on until ATLO (assembly and launch operations).
A TPM is a dynamic measure of the increasing maturity of the delivered product or service. It is NOT an agglomeration of the performance metrics.
Whehn you ask “what difference does it make…” then I’ve failed to convey the message. Forums are simply too narrow a bandwidth for that message it seems, time to move on.
Glen
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Glen B. Alleman Reply:
April 6th, 2009 at 11:32 pm
Sorting an aircraft?
I assume you mean how many ways can I look at the components of the program?
Let me count the ways…
By system is one.
By IPT
By Risk
By mission suitability factor
By technology
By Requirement identifier
By capability
By …
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Dr. Paul D. Giammalvo Reply:
April 6th, 2009 at 11:58 pm
Yes, that is what I was looking for…… Which correlates to what OmniClass is doing for the built environment…….
Traditionally, we (construction) have tended to only sort by Phase, Component and Trade, but OmniClass is taking it well beyond that….
Bringing it back to Josh’s original posting, answering a question about how to organize and plan a project using the WBS….. And the answer is “let me count the ways”……
BR,
PDG, Jakarta
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Apr 2nd, 2009 at 6:49 pm
There are different flavors of WBS and also serve different purposes. For example, PWBS is a project WBS and decomposes work to a certain level for a RFP. Organizations that respond to a RFP often develop a contractor WBS (CWBS), which decomposed the proposed scope to a lower level yet. A WBS can be oriented around but not limited to service, functionality, and systems.
A good WBS is a deliverable based structure. In software, the deliverable is often a release or a version of code. In construction, the deliverable could be foundation, sub-floor, walls, roof, etc. The WBS provides a focus based structure for the project manager. A WBS is a primary source of communication throughout the project life cycle and is reflected within the schedule, on all kinds of reports, charge number, risk registers, and invoices.
A good WBS will have a dictionary per control level, often called control accounts or cost accounts. The dictionary answers the “what” part of the scope. These accounts are where time, cost, quality, risk, performance, assumptions etc. are encapsulated and managed. Underneath these control accounts are the work packages and activities, which are statused during execution. The time and cost all roll-up into the control accounts and this is where monitoring and controls is performed.
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