Project duration based upon lump sum cost

[rbwillis]

Hello, I am a consultant who works on lump sum projects. I would like to use
MS Project to calculate project durations and Gantt charts based upon
resources (and associated bill rates) combined with their work allocation
percentage. I've tried several times to make this work and have even tried
to make my own custom fields but can't seen to get all the pieces / formulas
to work out.

Can anyone tell me if this should be possible w/o resorting to custom VBA
programming?
Thank you!

 

[Rob Schneider]

What you are trying to do is what Project is designed to do. Before
getting into a long discussion here about how to use Project, perhaps
first you should read Project Help, or read one of the good books on
Project, take a 2-day class, or see online help (ex: Mike Glen's
http://pubs.logicalexpressions.com/Pub0009/LPMFrame.asp?CMD=ArticleSearch&AUTH=23).
These places describe how to do what you want to do.

You want to compute project durations: so in Project terms this means
you know the Work (number of FTE hours/days), and you know the units of
resources (how many of you and your colleagues are available to be
assigned). With those two knowns, Project will compute the duration.


--rms

www.rmschneider.com

 

[Steve House]

Are you saying the work lasts as long as the money holds out, without regard
to the actual creation of the project's deliverables? It seems like that's
what you're saying here - we've been budgeted $10000 to do "X". If we get X
done after spending only $5k we just hang around doing make-work but keep
billing until we've spent the $10k. On the other hand, if we spend the $10k
and still haven't finished X, we just walk away. When you say that you have
a lump sum to work with and the time allocated depends on how long it takes
the resource cost to use up that amount, that's what it really boils down
to. I think that's why you're having difficulties getting Project to work
that way - it's a fundamentally illogical approach to scheduling. Projects
involve physical processes that create deliverables at a certain, usually
fixed, rate per man-hour spent. Estimating the time or man-hours required
to actually do the physical work needed to create the deliverables and then
deriving the cost from those required man-hours and resource cost is a much
more viable approach. Saying that we have X dollars and resources cost us Y
doillars per hour, therefore the project will take X/Y hours just doesn't
make sense because it doesn't take into account what the project is intended
to accomplish (other than spending money). On the other hand, saying it
will take us X hours to finish the thing the project creates, work costs us
Y dollars per hour, thus the project will cost X*Y dollars does make sense.
If your lump sum is greater than that amount you've made a profit. If it's
less, your project is doomed because you'll run out of money before its
goals are achieved.

 

[rbwillis]

Actually we work on projects for a fixed cost. The object is to get the work
done just as (or before) the money runs out. If we succeed then we earn the
profit built into our fee. If we go beyond, then profit reduces accordingly.
What I want to do with MS Project is to forecast the work load for
resources. As engineering consultants, we often continue to tweak on
projects long after we should have stopped, seeing profits dwindle in the
process. I'm hoping to be able to give staff an estimate of just how long
(at how hard, i.e. %) they have to complete the work. Money runs out, put
your pencils down. With several project ongoing at once we tend to wait till
the deadline is upon us and then scramble to complete the work. I'd like to
be able to pace ourselves by adjusting the % availability so as not to get
into a crunch. I know it's counter intuitive to how MS Project is designed
in it's base form, namely Resource x Duration = Project Cost. I simply need
find out how to get Project Cost / Resource = Duration. Thanks for any
insight you can offer.

 

[Rob Schneider]

Project doesn't use "cost" directly. It uses "work" which is great for
you. You can forget about cost (which is work x billing rate). You
need, I think, to keep work with the work budget. As you say, get the
work done. Which means in Project, to "spend" the work hours (liquidate
as my favourite boss from the past taught me) within your limits. Focus
on how much work allocated to each deliverable, and model/track those
deliverables in Project.

With this approach, and using Project as designed, you'll be able to
forecast very early on in the project when you think that the pencils
will need a case.


--rms

www.rmschneider.com

 

[Steve House]

The problem you'll face is that the duration, cost, etc of the project is
calculated from the task detail level up and MS Project doesn't have any way
to reverse the process and distribute costs or durations downwards from the
project totals to the individual task levels. Consider a project with 5
tasks and you've quoted a cost of $10,000. You can certainly say that since
your resources cost $100 per hour, the duration of that project needs to be
100 hours. But then you're stuck ... is that 20 hours on each task, 10
hours each on 1 through 4 with 60 hours on 5, just the reverse, or something
in between? There's no way to automate that process of distributing
duration (or costs). Due to the varying nature of each task, it is
impossible to develop an accurate algorithm to that will do it properly -
project has no idea of the nature of the work itself. Since the project's
duration is determined by the net contributions of the individual task
durations and schedules and not the other way around, it won't work.