Will my project finish on time and within budget?

Posted on in Business

A question we were asked and one all business will ask at some point during a project delivery. It doesn’t matter if you are a large or small business here is a way of projecting forward current project progress and spend to date to answer that question.

A simple worked example to illustrate the approach

Your project includes a task to build a brick wall. Your estimate shows you need 15,000 bricks. A bricklayer can lay 1,000 bricks per day so therefore the time to complete the wall is 15 days. An experienced bricklayer gets £300 per day so the cost to build the wall will be £4,500 (plus your contingency and profit).

The bricklayer you wanted was unavailable at the start of the project so you hire a different bricklayer at a cost of £200 per day.

There are three general outcomes; the task finishes on time and within budget, it finishes early or it finishes late.

Work starts and after 3 days is running late

After three days you check on progress only to find that 1,800 bricks have been laid; an average of 600 per day.

You can immediately calculate after three days you will be 10 days late in completing the wall as the rate of 600 bricks per day is lower than your estimate [15,000/600 days]. Furthermore, the cost will be £5,000 [£200 x 25 days] which is £500 over budget. You are facing the prospect of eating into your contingency and profit. Additionally, if the completion date of the wall is critical to the next activity then there will be a knock-on effect to the rest of the project.

What to do?

The good news is that you are only three days into the task so it is possible to instigate remedial action to bring the task back on track. Firstly you need to identify the reason for the the slower than anticipated progress which will indicate the best course of action required. Additionally, are there any factors that would indicate the current rate of progress will continue to task completion?

Work starts and after 3 days is ahead of schedule

After three days you check on progress only to find that 3,600 bricks have been laid; an average of 1,200 per day.

You can immediately calculate after three days you will be 2 ½ days early in completing the wall as the rate of 1,200 bricks per day is higher than your estimate [15,000/1,200 days]. Furthermore, the cost will be £2,6000 [£200 x 13 days, note bricklayer on a day rate] which is £1,900 under budget.

Whilst this may seem an excellent result there are some question to ask:

  • Did you estimate correctly in the first instance taking into account the degree of difficulty and risks involved? In which case this should be borne in mind to refine subsequent estimates.
  • What are the reasons why it is being completed quicker than anticipated? Has anything changed between what you were expecting and what is being delivered?
  • Finally, is it reasonable to assume that work will continue at the current rate of progress?

Work starts and after 3 days is on schedule

After three days you check on progress and find progress is on schedule. You should therefore confirm that work will continue at the current rate of progress.

Performance Measurement System (PMS)

The above example demonstrates the principles of a PMS system. The example is simplified to illustrate that against any task the system uses two variables:

  1. The work required (the activity task and associated budget) against a timeline.
  2. The work done to date (performance achieved in terms of schedule and budget).

From the above the efficiency of the work done to date vs. the schedule of work to be performed to date is calculated (the % efficiency of doing work) which is used to give an indication of the outturn of the task either under/on/over budget.

You will note that whilst some simple arithmetic can be used to predict the future based on past performance there are human and environmental factors that should to be taken into consideration when reviewing the calculated outcome.
When running a project with many tasks this approach allows the experienced project manager to quickly identify which tasks need attention and which are running to schedule.

Extending the PMS approach

Now this PMS approach can be extended significantly if, for example, a task requires some value judgement on the part of the worker to estimate how much progress has been achieved to date against the schedule and how much work is left to complete before reaching a task completion milestone. The steps are:

  • The worker estimates the work done to date and the amount of work required to complete the task.
  • These estimates are then compared against past performance achieved to give an indication as to how realistic the estimated figure is and, importantly, if the two figures (worker estimate vs. past performance projected forward) vary significantly.

This allows a judgement to be made as to whether the work done to date and work required to completion are reasonable assumptions of if there are some external factors driving any variations. The human element comes into play here as people are can be over optimistic or pessimistic - and that’s the trick to be able to recognise this and make allowances to arrive at a realistic task outcome.