University:
California State University, Northridge
Course:
SOM 466 | Project Management
Academic year:

2014
Views:

302

Pages:

17
Author:

Rayan Alvarez

Project Time and Cost Management Part 3  A buffer is additional time to complete a task.  Murphy’s Law states that if something can go wrong, it will.  Parkinson’s Law states that work expands to fill the time allowed.  In traditional estimates, people often add a buffer to each task and use it if it’s needed or not.  Critical chain scheduling removes buffers from individual tasks and instead creates ◦ a project buffer or additional time added before the project’s due date. ◦ feeding buffers or additional time added before tasks on the critical path. 47 X = Activities done by limited resource FB = Feeding buffer 48  Several healthcare organizations have applied the theory of constraints (TOC) to improve patient flow. Consider a relatively simple system of a physician’s office or clinic. The steps in the process could be patients checking in, filling out forms, having vital signs taken by a nurse, seeing the physician, seeing the nurse for a prescribed procedure such as vaccination, and so forth. These steps could take place in a simple linear sequence or chain ...Each link in this chain has the ability to perform its tasks at different average rates. In this example, the first resource can process 13 patients, charts, or blood samples per an hour; the second can process 17, and so forth. One may think that this process can produce 13 per hour, the average of all resources. In fact, this process or chain only can produce an average of eight [patients, charts, or blood samples] per hour. The chain is only as strong as its weakest link and the rate of the slowest resource in this example, the weakest link, is eight. This is true regardless of how fast each of the other resources can process individually, how much work is stuffed into the pipeline, or how complex the process or set of interconnected processes is to complete. Moreover, improving the performance of any link besides the constraint does nothing to improve the system as a whole.4  The CEO of a large healthcare organization in England described the success they had in reducing the length of hospital stays by using TOC. “With the help of Theory of Constraint we have been able to move Barnet & Chase Farm Hospitals NHS Trust from one of the worst performing trusts in England to one of the top performing. In Q4 (2007-2008) we were the top performing trust in London for the 4 hour target and 6th across England. Also, by applying the Theory of Constraints to our discharge process we have been able to reduce our length of stay by 27% and we know we can improve further on this.” 5 49 50 51  Project cost management includes the processes required to ensure that a project team completes a project within an approved budget  The main planning tasks are planning cost management, estimating costs, and determining the budget  The main documents produced include a cost management plan, a cost estimate, and a cost performance baseline 52  The purpose of this process is to determine the policies, procedures, and documentation for planning, managing, executing, and controlling project costs.  The project team holds meetings, consults with experts, and analyzes data to help produce a cost management plan, which becomes a component of the project management plan. 53  Project teams normally prepare cost estimates at various stages of a project, and these estimates should be fine-tuned as time progresses  It is also important to provide supporting details for the estimates, including ground rules and assumptions (sometimes called the basis of estimates)  A large percentage of total project costs are often labor costs, so it is important to do a good job estimating labor hours and costs 54  Michael Porter and Robert S. Kaplan, Harvard Business School professors and authors of the Harvard Business Review article "How to Solve the Cost Crisis in Health Care," discuss this topic in a short (less than ten minute) video.  Porter suggests that many efforts to reduce healthcare costs are ineffective because organizations in healthcare don’t know how to measure their costs properly.  Kaplan says that the definition of costs should be costs within the system and that the patient should be the fundamental costing unit.  Costs should focus on particular medical conditions (such as diabetes or knee replacements), and organizations should focus on adding value by comparing costs with patient outcomes. 55  Analogous estimates, also called top-down estimates, use the actual cost of a previous, similar project as the basis for estimating the cost of the current project. This technique requires a good deal of expert judgment and is generally less costly than others are, but it can also be less accurate  Bottom-up estimates involve estimating individual activities and summing them to get a project total. This approach can increase the accuracy of the cost estimate, but it can also be time intensive and, therefore, expensive to develop  Parametric modeling uses project characteristics (parameters) in a mathematical model to estimate project costs 56  See the detailed steps, ground rules, and assumptions that Jeff’s team used for developing their cost estimate  Summary information was documented in a cost model  Just as projects are unique, so are cost estimates  Consult with internal and external experts and organizations for assistance 57 58  Project cost budgeting involves allocating the project cost estimate to tasks over time  The tasks are based on the work breakdown structure for the project  The main goal of the cost budgeting process is to produce a cost baseline, or time-phased budget, that project managers use to measure and monitor cost performance 59 60 61  A project network diagram shows the sequencing of project activities, and a Gantt chart is a standard format for displaying project schedule information by listing activities and their corresponding start and finish dates in a calendar format.  It is also important to understand critical path analysis to make schedule trade-off decisions. Critical chain scheduling can also help in scheduling when there are scarce resources involved in a project.  There are several methods for creating cost estimates, such as analogous, bottom-up, and parametric. A cost baseline is a time-phased budget that project managers use to measure and monitor cost performance. 62

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