Put in milestones that give some key dates and that will help communi- cate and explain the plan to your customer, and which you can use as overall markers of progress. To select milestones, choose key events that are meaningful and helpful to your customer. The milestones for the office re-fit project example could be:
● 7 July – Office fitted and ready to be furnished
● 8 August – Office furnished
● 1 September – Project completed and office ready for use
You add contingency to account for the inherent risk in the project. This can be done in two ways:
1.As a top-down estimate.Looking at the whole plan and using a feel for how much risk there is. This is effectively a project manager’s intuition, or gut-feel, about the project. The example project feels like a reasonably low-risk project to me, so I would add a 10–20 per cent buffer to costs and time.
2.As a bottom-up estimate.Looking at every individual task in the plan and identifying how much risk there is associated with every
elements of the project and identify risks and add contingency for each of them. This is generally more accurate, but can be very time- consuming for a complex project because you may have hundreds of tasks to review. For the example project, this is what I have done.
PROJECT BUDGET Project Name: Office Re-fit Project
P
Prroojjeecctt ssttaaffff ccoossttss ((vvaarriiaabbllee)) TToottaallss P
Peerrssoonn UUnniitt CCoosstt UUnniittss TToottaall
Dave £400 per day 8 days £3,200
Mary £300 per day 35 days £10,500
Adam £325 per day 4 days £1,500
Project Manager £300 per day 70 days £21,000
T
Toottaall PPrroojjeecctt SSttaaffff CCoossttss £36,200 O
Otthheerr pprroojjeecctt vvaarriiaabbllee ccoossttss
IItteemm UUnniitt CCoosstt UUnniittss TToottaall Office rental £1000 per week 13 weeks £13,000
T
Toottaall PPrroojjeecctt VVaarriiaabbllee CCoossttss £13,000 P
Prroojjeecctt ffiixxeedd ccoossttss
IItteemm TToottaall iitteemm ccoosstt
Contractor (set fee) £20,000
Copy of project management software £400
T
Toottaall pprroojjeecctt ffiixxeedd ccoossttss £20,400 T
Toottaall ccoosstt ttoo rruunn pprroojjeecctt £69,600 D
Deelliivveerraabbllee vvaarriiaabbllee ccoossttss
IItteemm UUnniitt CCoosstt UUnniittss TToottaall
Chairs £100 per chair 100 £10,000
Desks £300 per desk 100 £30,000
PC £1000 per PC 100 £100,000
PC software £450 per PC 100 £45,000
Telephone handsets £50 per handset 100 £5,000
Light fittings £150 per light 40 £6,000
Socket fittings £75 per socket 200 £15,000
Carpet £50 pr sq mtr 1250 £50,000
T
Toottaall ddeelliivveerraabbllee vvaarriiaabbllee ccoossttss £261,000
D
Deelliivveerraabbllee ffiixxeedd ccoossttss
IItteemm TToottaall iitteemm ccoosstt
Miscellaneous additional furniture £10,000
Disposal of old furniture and carpets £5,000
T
Toottaall ddeelliivveerraabbllee ffiixxeedd ccoossttss £15,000 T
Toottaall ccoossttss ffoorr pprroojjeecctt ddeelliivveerraabblleess £276,000 T
Toottaall pprroojjeecctt bbuuddggeett rreeqquuiirreedd £345,600 Table 3.7 Project costs So what are the riskiest parts of this plan? From my perspective I think they are:
● The assumption that your contractor will be ready to start work the day after you have selected him or her. Allow 10 days’ contingency here.
● The three delays waiting for equipment to be delivered. What if your suppliers are late? Allow another 10 days’ contingency here.
● Tasks 26 and 27 require installing 100 PCs. In my experience some- thing will go wrong that will take some time to resolve. Allow two days extra to account for problems.
● The deliverable variable costs. You know the costs of PCs and soft- ware, but the furniture and fitting costs are best guesses and could be wrong. Allow an extra 25 per cent budget for these items – or
£28k (25 per cent of £111k).
● The cost of staff required if you use the 22 days’ contingency. Most of the 22 days’ contingency if used will be extra waiting time when no one is working, but it may add 22 days to the project manager’s time (£6,600), and two extra days for Mary (£600).
There is no great science to the estimates I have used for contingency, other than that they seem about right. There are more formal approaches and algorithms you can use for calculating contingency, but unless the project is very complex these are unnecessary. Where you know you can estimate something accurately, you need little contin- gency. Where you do not know, or there are many assumptions about a
project – you must add enough contingency to give yourself confidence you can deliver the project.
Having contingency does not mean that you give the people doing those tasks an extra 22 days and £35,200 to spend, but that as the project manager, you hold this as a buffer you can use only when you need to.
We will explore this more in Chapter 4. What this means though is that you will ask:
● For a project budget of £380,800, which typically I would round up to budget of £385k.
● For time until 29 September to complete the project.
Does adding an additional 22 days seem a lot? Consider the situation whereby you will make all staff leave their existing office when the project is complete, and you will advise your existing landlord and terminate your rental from that date. If you tell everyone you will complete on 1 September and are then not ready, you risk a big problem for your business as where then will you staff work from? Better have some contingency and avoid this risk. You may even decide that, given the business risk, 22 days is not enough contingency. Now is the time to be sensibly cautious, not heroically over-optimistic.