BRIEF HISTORY OF

PROJECT MANAGEMENT

One of the earliest forms of project management dates back to Ancient Egypt -- more
specifically to the construction of King Khufu's Great Pyramid at Giza, in 2570 BC. According to
historians and ancient records, Egyptians appointed managers to oversee the completion of
each of the four sides of the pyramid, and they were also responsible for the planning and the
execution of the project.

Another great example of how project management appeared in ancient history is the
construction of the Great Wall of China, in 208 BC. This time, not only did the emperor order
millions of people to complete the project, but he also made sure that his workforce was divided
into three separate groups: soldiers, civilians and criminals (we guess the latter group got a raw
deal).

THE EARLY YEARS

The first and second Industrial Revolutions brought about significant changes in the
development of project management. Although the two revolutions are mainly associated with
improved working and living conditions, with urbanisation and great engineering works (like the
first railway and the completion of the first transcontinental railroad) their effect on project
management shouldn't be overlooked either. During the industrial revolution, industry expanded
rapidly all over the world. The beginning of automation and the growth of factories meant that
everything was done on a much greater scale. This, in turn, meant that people were able to
manage projects in a completely different and more extensive way.

THE 20TH CENTURY

The 20th century saw significant changes in the world of project management. Both Frederick
Taylor (often referred to as the Father of Scientific Management) and his friend Henry Gantt
played an important role in the way projects were managed -- and are still managed today.

THE GANTT CHART

Henry Gantt, known as one of the forefathers of project management, is probably best known
for creating and designing his famous diagrammed, the Gantt chart -- a radical idea at the time,
and an innovation that changed the way projects were managed and documented in the 20th
century.
Developed in 1917, the aim of Gantt's chart was to track the progress of ship building projects
during World War I. By documenting and examining each step of the process, he was able to
get a clear overall view of the entire project and gather information about the connection
between various functions.

Gantt chart
• Gantt chart, a bar graph that measures planned and completed work along
each stage of production.

THE 1950S
The 1950s marked the beginning of the modern project management era, when project
management became recognized as a distinct discipline and companies began to apply formal
project management tools and techniques to complex projects.
One of the most important inventions of the decade was the Critical Path Method (CPM),
developed by DuPont Corporation and Remington Rand Corporation in 1957. The aim of CPM
was to assess and calculate the activities required to complete a project and predict the length
of each of these phases. The idea was so successful that it is reported to have saved the
company $1 million in its first year of implementation.

CRITICAL PATH METHOD (CPM)

• The sequence of scheduled activities that determines the duration of the
project”. These scheduled activities must be performed if the project is to be
considered a success.
• a step-by-step project management technique for process planning that
defines critical and non-critical tasks.
• also known as Critical Path Analysis (CPA), identifies dependencies between
tasks, and shows which tasks are critical to a project.

Another significant development from this era is the Program Evaluation and Review Technique
(or simply PERT), developed by the United States Navy as part of the Polaris missile submarine
program. Similarly to CPM, PERT is used for analysing the tasks that are required to complete a
specific project, as well as estimating the time needed to complete each of these task, and the
project itself.

Although the two methods are very similar, there is a critical difference between the two. While
CPM is used for projects where the time at which each individual task is supposed to be carried
out are known, PERT is used for projects where these times are either varied or unknown.
Because of this difference, CPM and PERT are used in completely different contexts, and are
not interchangeable.

BECOMING A PROFESSION
The 1960s saw the foundation of two project management associations. The International
Project Management Association (IPMA, although it was initially called the International
Management Systems Association) was founded in Vienna in 1965. A federation of more than
55 national and international project management associations, the aim of IPMA is to develop
and promote project management as a profession, as well as to establish and provide
guidelines for the work of project management professionals worldwide. Today, the association
has nearly 400,000 members all over the world.

Another key development was the birth of the Project Management Institute (PMI) in 1969. The
aim of PMI is to promote project management as a profession, and it also offers various
certifications to project management professionals. In the UK, the Association for Project
Management (APM), a professional certification body and project management association, was
founded in 1972, and has been at the forefront of the development of project management ever
since. Representing more than 20,000 project management professionals, APM is now a key
influence in the industry.

THE FUTURE
Thanks to globalization and our rapidly changing world, projects are becoming larger and more
complex, and therefore increasingly difficult to manage. New project management techniques
and more efficient practices will no doubt appear, which makes project management a very
interesting and exciting place to be.

What is a Project?
 • A temporary unique group activity intended to meet specific objectives with constraints
and requirements in scope, budget, schedule, resources, performance factors, and value
designed to meet the customer needs.
• It is defined as a sequence of tasks that must be completed to attain a certain outcome.
and must come up with an output upon its completion called deliverable.

Deliverable
 the measurable and tangible outcome or the result of the completion of
the project or the end of the project’s life cycle.
 can also be intangible, though no less important in this state. For
example, “increasing sales by 10 percent for the third quarter” could be a
deliverable
 Deliverable can be in the following form:
1) Hardware deliverable – these are items like table, or a piece of
equipment.
2) Software deliverable – these are items like reports, studies,
handouts and documentation
3) Interim deliverable – these are items that could be hardware or
software and gradually advances as the project progresses. It is an
intermediate deliverable produced before the final deliverable. (by
phase)

• A Project is different from other organizational efforts being undertaken by most

organizations because of the following reasons:
1. it has an established objective
2. it has defined life span with beginning and an end
3. it requires the involvement of several department and professionals
4. it is doing something that has never been done before
5. it has specific time, budget, resources, performance and value-added
requirements

Advantages of Project Management

1. More resourceful handling of resources as both the schedule and the budget are clear in
the project plan.
2. An improved teamwork atmosphere because of the implementation of a formal process
for acknowledging/resolving conflicts.
3. A flattering touch of professionalism to the company that leads to a healthier insight by
external organizations.

The main advantage of project management is that it helps the organization manage their
projects effectively, enabling them to resolve problems more quickly. It takes time and money
to manage a project, however the following good practices can help:
 improve your chances of achieving the desired result.
 prioritize your business’ resources and ensure their efficient use.
 set the scope, schedule and budget accurately from the start.
 stay on schedule and keep costs and resources to budget.

Basic principles of project management

While every project is unique in its own way, there are certain project management principles
that apply to most projects. These are:
1) Project objectives. The main point of any project is to achieve specified business goals
and objectives. You should establish from the start what it is that you want your project to
accomplish. To be effective, your objectives should be as specific as possible. You
may express your objectives as:
§ outputs - e.g. a new building
§ outcomes - e.g. staff relocating to a new building
§ benefits - e.g. reduced travel, or simplified facilities management
§ strategic objectives - e.g. increasing organization’s share price

2) Project Constraints. A Constraint is any factor that can limit or have an impact on a
project. The three most significant project management constraints are:
 costs - how much money is available to achieve an outcome.
 schedule - the timescales for delivering the output.

Other common constraints include:

 quality - does the outcome match your project expectations.
 resources - who will carry out the work, with what materials/resources.
 risks - potential difficulties and how to mitigate against them. Normally the
riskiest is in the beginning of the project when many challenges are still unknown
and have not been discovered and dealt with

3) Project life cycle. Also referred to as Project life span. The process of managing
projects entails five basic stages (or phases). These are:

1. Project initiation – Project initiation is the formal start of a project. It usually

begins with the issue of a Project Instruction which briefly describes the purpose
of the project and authorizes budget spend. During the initiation stage, you
should define the business case for the project and state:
 what the project aims to achieve
 how you will achieve this (including what resources you have to achieve
this)
 the scope and nature of the work

By this point, you should assign responsibilities and roles to various people
involved in the project. You should also:

 thoroughly understand the customer or stakeholders' expectations for the

project
 carry out the work to broadly plan
 generally define the 'who, why, what, when and how' of the project
 determine the criteria for closing and assessing the project
 develop a risk log

2. Project Definition, Planning, and Development. After the initial high level
planning, a more detailed phase of planning and development usually occurs.
During this phase, you will need to create a set of plans to help guide your
project team through the project execution and closure. These plans should
set out a clear specification for what needs to be done, who needs to do it,
and when.
 Your project plan and schedule should factor in:
 time, cost and resources that are at your disposal.
 quality
 progress checkpoints
 risk and resources for resolving unforeseen issues.

The planning phase is often the most challenging phase in project

management, as it may not always be clear what resources, time or staff you
need to complete your work.

3. Project implementation – The project implementation stage begins when

you put your project plan into action. During this stage, you build the project
deliverables (to produce the expected result) as defined by the project plan
and, if applicable, present them to teams, customers or suppliers for sign off.

 At this stage, it is important to carefully monitor and control the project

to keep focus on its objectives.
 You can use a range of processes to help you manage things like time,
cost, quality and risks, or to communicate progress and manage
customer acceptance.

4. Project monitoring and controlling

 During the implementation stage, you should keep track of project
progress and deal with any issues that arise from day-to-day work.
 Observe and measure project performance regularly, and measure quality
to maximize chances of project success.

5. Project Close. Project closure is the last phase in the project life cycle.
During this phase, you will complete your work and dissolve the project.
Closure does not necessarily mean success, but simply the final point of the
project – e.g. closure can happen when you cancel projects that fail. Project
closure often involves things like:
 handing over the deliverables
 releasing staff and resources
 archiving or handing over any relevant project documents
 cancelling supplier contracts
 finalization of all activities across the project
 handover into business as usual if this applies

After you close the project, you should carry out a post-
implementation project review. This is a good opportunity not only to
determine the project’s success, but also to identify 'lessons learned' and use
them to improve any future projects and plans.

4) Project tools and Templates. While every project is unique in its own way and may
need specific tools to succeed, there are some basic templates and processes which are
commonly used to manage projects.
 a) Project scope template . The processes of delivering the project scope
should be factored into a project plan. The scope is usually clearly defined by the
planning and development phase of any project.

b) Project risk register template. Risk or issue registers are common tools
for identifying, analyzing and managing risk (something which has not yet
occurred) and issues (something which has already occurred). Using these
registers, project teams can estimate and adjust their planned activities, taking
into account risks and issues, thereby managing their impact.

SWOT Analysis . A strengths, weaknesses, opportunities and threats (SWOT)

analysis is a commonly used strategic tool to evaluate a project or a business. In
relation to a project, the analysis can be defined as:

 strengths - factors within the project or organization that are helpful to

achieving objectives
 weaknesses - factors or constraints to the project or organization that are
harmful to achieving objectives
 opportunities - external conditions that are helpful to achieving objective
 threats - external conditions which could hinder achieving objectives

c) Project Library. Without a proper, centralized system of logging and storing of

information about a project, important data can become lost or inaccessible very
quickly, with a risk of poor version control. This can cause duplication of effort and
conflicting iterations of project documents in circulation, and can be particularly
problematic in lengthy projects or those with a greater number of people involved.
It is worth considering creating a project library so that everyone has easy access
via a single point to the most up-to-date information. You should make sure that
these documents will be accessible in the future - e.g. in a shared file rather than
on an individual's computer.

d) Project Review Template. a project review is important to look at lessons

learned in the completion of the project.
Keep - ie this was effective and you should definitely use it again
Improve - this was good but there were areas that could be done better
Start - things you didn't do but now realize you could do in future projects
Stop - things that should not be repeated

The Project Manager

 The Project Manager is the person accountable for accomplishing the project objectives.
 He/she manages the operations of an individual project within the program.
 He or she coordinates time, budget, and resources and delegates tasks across the
team.

Aside from the above-mentioned definitions, the project manager is responsible for the following
tasks:
1) Describing the scope of the project accurately
2) Setting up the project schedule, and revising that schedule as it progress
3) Recommending the project cost and then administering the project to avoid cost
overruns
 4) Ensuring the project team has the supplies and human resources required to get the
project done on time and cost
5) Naming and reducing possible risks to the project timeframe and cost
6) Ensuring that all project team members realize what their responsibilities are
7) Communicate the project’s development to management
8) Guarantee the quality of the team’s work and any supplies or materials used by the team

Key Skills of a Project Manager

1) Organizational Skill. A project manager creates structure from chaos by using specific
tools such as charter, risk assessments, Gantt charts, decision matrices, and many other
tools throughout the project.

2) Skill to develop people. Training and development of people working for the project is
a commitment of the project manager. As a manager, he has to add to each member’s
experience making them more knowledgeable and proficient at the end of the project
that when they started it.

3) Communication Skill. A project manager must be proficient in both oral and written
communication to always make certain that he is clearly understood by all stakeholders.
Good communication skill is important in keeping the project progressing, spotting
probable problems, getting suggestions for project performance improvement, being
updated with ways of satisfying customers, and creating good working relations with the
project team among others.

4) Interpersonal Skill. A project leader must be able to communicate goals, responsibility

performance, expectations, and feedback. The leader must have the skill to successfully
bargain and make use of influence when needed to make certain the success of the
team among others.

5) Skill to handle stress. A project manager should be able to manage stress from work
situations that are both tense and severe at times. Even well-planned projects may
become subject to unforeseen events that can cause urgent disorder for which the
manager must not panic. The project manager must have a sense of humor, be
physically fit through regular exercise, and have good nutrition to handle stress related to
his work.

6) Problem-solving skills. A project manager ought to persuade project team members to

recognize problems early and be self-directed in resolving them. Using analytical skills,
the project leader, together with project team members should evaluate the information
and formulate optimal solutions to the problem.

7) Management and Leadership Skill. A project manager must know how to motivate
people who do not work for them, and keep teams working effectively together.

8) Time Management Skill. Time is a project manager’s scarcest resource. Budgeting

time wisely and immediately adjusting priorities is required of the project leader.

9) Technical Skill. Technical knowledge bestows the project manager the creditability to
offer leadership on a technically based project, the capability to comprehend vital
aspects of the project, and the aptitude to converse in the lingo of the technicians.
Important Characteristics of an Effective Project Team Member
1) Team Players. Turn your back from a person with a diva-liked personality or a character
for being arrogant or belittling others, even how experienced or Skillful that person might
be. Somebody who desires special attention is prone to become the root of splitting up
and draw focus away from the project. Use peer evaluations from previous project teams
to study the most likely candidates.

2) Self-Starters. Effective project team members are primed even from the start; prepared,
eager and enthusiastic to get the job. They know the need for a solid plan.

3) Influential. Members of an effective project team should have positive influence over
their peers. They should be able to persuade community members who could be helpful
to the project as well as their superiors and subordinates.

4) Motivational. It is just as imperative the project team members are able to inspire and
encourage one another as well as themselves. A motivated team will have clear project
goals in sight and have the endurance to carry through to completion.

5) Have skills and experience. An effective project team has team members with talent,
knowledge and familiarity essential to complete the activities handed over to them. The
team must have an assortment of skills and personalities.

6) Dependable. The members of an effective project team are dependable, responsible

and accountable to one another as well as to themselves. They generate a sensible
schedule that integrates timeliness with precision and detail, leaving several
opportunities for unseen obstacles.

7) Can Communicate well. Effective project team members know how to express
themselves in a way that gets their point across without offending others. They also
effectively listen when others are articulating thoughts, opinions and ideas. This
characteristic reduces the chances of misunderstandings and misfortune, as well.

8) Committed. Team members who are committed to the organization as well as the
project in common are highly effective. They are much more likely to give 100% at every
step of the project and go above and beyond when required. These are the team
members who tend to set up weekly meetings in order to make sure everyone is on track
and that there are no foreseeable problems.

9) Can think creatively. One of the often overlooked yet highly valuable characteristics of
an effective project team are that they are able to think imaginatively. They are
resourceful by nature and look for ways to make the best of the tools and materials that
are available.

10) Supportive. Last but certainly not least, effective project team members should be
supportive of the project, the company and one another. When the project teams stands
behind what the organization and project represents, rest assured that they will perform
the best job possible. A supportive team will check in with one another to learn the
project status and see whether any of their team mates need help. They will work
together to ensure that the project is completed in a timely and successful manner.
 CONFLICT AND NEGOTIATIONS

CONFLICT
❃ The process by which individuals or groups perceive that someone has taken action that
has frustrated or is about to frustrate a major concern of his or their interests

NEGOTIATION
❃ It is the process of engaging in a conflict exchange of offers and counteroffers by two
conflicting to find a mutually acceptable agreement

Types of Conflict:

1) Conflict over project priorities. Outlooks of project team members vary over the
progression of activities and tasks
2) Conflict over administration procedures. Conflicts over managerial and administrative
issues on the manner of organizing and managing the project
3) Conflict over technical opinions and performance trade-offs. Disagreements over
technical matters and performance specifications.
4) Conflict over human resources. Conflicts about staffing and allocating project
personnel and where to get them and how
5) Conflict over cost and budget. Conflict on cost estimates from support areas regarding
work breakdown structures and estimating techniques
6) Conflict over schedule. Disagreements over the time, sequence, and schedules of
project related tasks and information system to set up and check project schedules.
7) Personality Conflict. Disagreements over interpersonal issues.

Fundamental Issues for Potential Conflict:

1) Ambiguous definition of responsibility. When it is vague who is in charge of what

area of a project task, conflict can take place.

2) Conflict of Interest. This is when a person’s own goals or interests clash with the goals
of the organization.

3) Scarce Resources. Rivalry over resources (e.g. money, time, materials) could be the
cause for the teams to destabilize each other, leading to conflict among departments or
other work group.

4) Interpersonal Relationships. The personalities of the people concerned in the

organizational structure have a significant role in potential conflict

NEGOTIATION
• It is the process of engaging in a conflict exchange of offers and counteroffers by two
conflicting to find a mutually acceptable agreement
• Its objective is to LESSEN or PUT AN END to the conflict.
Three key requirements when negotiating:

1) Conflicts must be resolved with no irremediable damage to the project’s objectives

2) The techniques must promote honesty among negotiators.
3) The solution must be based on the project and must satisfy the needs of the bargaining
parties, other parties, and the parent organizations.

PRINCIPLED NEGOTIATION
 the art of soliciting agreement with the other party while preserving a principled “win-win”
attitude

Propositions for an effective negotiating strategy:

1) Detect the root of the conflict
2) Persuade both parties to identify and know their emotions.
3) Identify how each party can get what it desires
4) Resourcefully endeavor to generate alternatives that offer reciprocal gains for both
parties
5) Do not give in to pressure
6) If things are not working out and neither side is happy, take a break

PROJECT ACTIVITY PLANNING

Project Planning
 It entails describing clear, distinct activities and the work requires to finish each activity in
a particular project.
 This is normally created by jotting down the order of activities needed to implement the
project from start to completion.

The project is divided into nine segments based on the planning process:

1) Concept Evaluation. A project concept evaluation is a type of evaluation in which the

product/project concept developed so far is reviewed.

2) Requirements Identification. It is determining the resources needed for the completion

of the project like labor, equipment, and materials. There must also be a schedule
indicating when each resource will be employed and note any assumptions and
constraints made during the resource planning process.

3) Design. It is creating the blueprint of the project with technical details that will enable the
development team to proceed with the build and/or configuration of the solution. It
should be approved to ensure compliance with the standard.

4) Implementation. This is the manner of completing the project.

 5) Test. This segment will detail all levels of testing to be performed during the
build/configure/test phase of the project. Repetitions of testing cycles as well as
environments to be utilized for the testing should be indicated.

6) Integration. It is the coordination of the various elements of the project in order to meet
their mutual goals of scope, schedule and budget to meet entire project goals.

7) Validation. It confirms that the work being considered matches the details in the project
scope and the project management plan.

8) Customer test and evaluation. It is a critical aspect of project management involving

complex systems that must satisfy specification requirements of the customer.

9) Preparation and maintenance. It is the guide in the preparation for the implementation
of the project and the sustenance of all resources.

Project Charter
 A single consolidated source of information about the project in terms of initiation and
planning.
 It defines the boundaries of the project and lays the foundation of the project.
 It describes the motivation behind the project and presents the business case for
selecting the project.
 It also identifies the deliverables, name of the risks involved, describe the resources
(both human, capital, materials), and technologies.
 It forms a contract with all stakeholders involved in the project.

Note:
 Once the top management approves the project charter, the project manager
prepares the project plan that shows how to achieve the approved project goals.

 Every project charter should consist of at least three primary components which are
the Project Overview Section, Project Approach Section, and Project Approval
Section.

Project Overview Selection

1) Identification (Project Formal Name) – Give the formal name of the project
as well as any other terms that might be used to identify the project and the
primary groups that will be involved with it. Within this consistent terminology,
it will be easier for all parties involved like project team, stakeholders, and
end users to discuss and work on the project.

2) Project Background and History – Give any background information that

will help explain how the project came to be.

3) Project Purpose and/or Business Need – Explain why the project is

needed. If applicable, include details of why existing tools or products are
insufficient. If there are supporting documents available for any of these
reasons, list them here and include them as appendices to the charter.
4) Project Scope and Limitations – Define the project scope, being watchful to
note boundaries and limitations. The project scope should be unmistakably
detailed so that all parties involved are very aware of exactly what the project
includes as well as what it doesn’t.

5) Project Goals and Objectives – Using appropriate business terminology;

state all objectives for the project. Be sure to include the project’s intended
purpose in language that is both concise and self-explanatory.

6) Project Sponsorship and Major Stakeholders – Provide a list of names

identifying the major parties involved in the project, such as project sponsors,
stakeholders, and eventual project owners. In addition, be sure to identify the
role of everyone listed so that there is no confusion concerning
responsibilities later down the line. These names should also be included in
the Project Approval Section.

7) Pertinent Documents and References – List any related documents or

other resources that could clarify various aspects of the project, such as the
scope and business need. If these documents are particularly crucial, they
can also be included as appendices to the charter.

8) Overview of Project Terminology – provide a basic, but complete, glossary

that defines special terms related to the project. If there are any key terms,
phrases, or acronyms that might prove to be confusing or new to anyone
related to the project, be sure to include them in this section.

Project Approach Section

1) Project Deliverables – List the major deliverables of the project and
include when these goals should be achieved. Most importantly,
remember to include the key milestone of the project.

2) Responsibilities and Roles – include a summary of all parties that will

be involved in the project and what their roles will be. Also, list the needed
skills and expertise that everyone brings to the project as well as each
person’s responsibilities.

3) Project resources – in addition to the human component; include other

resources that will be needed for satisfactory completion of the project.
Provide a list of computer equipment, raw materials, working space, and
any other resources that might be taxed during the project’s life cycle. If
certain resources will only be needed during specific phases of the
project, make note of that as well.

4) Risk Management Overview – Give a summary of the risks that may be

encountered during the project as well as how these risks may be
minimized. Risk mitigation and action steps can be listed.

5) Project Process Summary – Explain which of the organization’s project

management methodologies will be employed for this project. If there is a
plan to deviate from standard means and methodologies, explain that as
well.
 6) Project Life Cycle Overview – Give a basic breakdown of the project life
cycle and list the various stages that the project will go through. Make
sure to include the objectives of each stage and why the stage is
necessary.

7) Basic Project Control and Communication Plan – The project control

component explains the tools that will be used to assist the project
manager in tracking the project’s progress. It also serves as a
communication device for communicating the project’s progress to the
project team, project sponsors, and project stakeholders.

8) Project Schedule – Provide a fundamental schedule overview that lists,

among other things, the key milestones, and stages of the project.
Various exhibits such as Gantt chart should be included in this section.

Project Approval Section

1) This section should list all the names and roles of the major
stakeholders along with their signatures, indicating that each of these
individuals is satisfied with the details included in the project charter.

2) In addition, if the project will require resources from other departments

or groups, a representative from each of these divisions should be
listed in the Approval section as well. The signatures of these
individuals will signify that they accept their own responsibilities for
successful completion of the project and agree to provide needed
support.

PROJECT BUDGETING AND COST ESTIMATION

Project Budget
 A detailed, time-phased estimate of all resource costs for a project.
 Typically developed in stages which are from a preliminary rough estimate to a detailed
estimate to a completed, approved project budget.

Cost Estimating
 The process of approximating a reasonable time phased budget by identifying the cost
of resources required in order to complete project activities.
 It should be made by someone who would always be sensible with numbers, meaning
no overestimate or underestimate.
 It ought to describe the purpose of the project, what it will carry out, what assumptions
are prepared, how long the estimate is legally binding, and how much the project will
spend.
 It should be flexible, adaptable, and provide a range of the costs involved.

Importance of Estimating a Project’s Costs:

1) It makes possible to the project manager to consider probable benefits against estimated
costs to see whether the project is logical.
 2) It permits the project manager to distinguish whether the necessary funds are obtainable
to sustain the project.
3) It provides as a guideline to help ensure that there is adequate funds to finish the
project.
Types of Project Costs

1) Direct versus Indirect Costs

Direct costs
 those costs directly related to the project like labor and materials.

Indirect Costs
 those necessary to keep the organization running, but not actually associated
with any specific project.

2 types of Indirect Costs

a) Overhead Costs – comprise all indirect materials, utilities, taxes,
insurance, and repairs.
b) Selling and General Administration costs – are costs such as
advertising, shipping, office space rent, sales commission, and
other similar costs.

2) Recurring versus Nonrecurring Costs

 Recurring costs are those that normally continue to operate over the project’s
life cycle
 Nonrecurring costs are those charges applied once at the start or end of the
project like preliminary marketing analysis, personnel training, or outplacement
services.

3) Fixed versus Variable Costs

 Fixed costs are those costs that stay constant despite changes in the level of
project activities. (Example: rent, loan payments)

 Variable costs are those that differ in direct proportion to the changes in the
level of project activities. (Example: hourly labor, cost of materials, fuel for
vehicles)

4) Normal versus Expedited Costs

 Normal costs are those acquired in the regular process of working to finish the
project based on the original, planned schedule.

 Expedited costs are those unplanned costs acquired to accelerate the

completion of the project. (Example: overtime pay, hiring additional temporary
workers)

Project Costs Estimating Issues

1) Short initial estimates – this is caused by inadequate awareness of the project scope.
2) Unpredicted technical difficulties – the assumption that technical problems would be
minimal is also a common problem in costs estimates.
3) Specification changes – this is caused by midcourse specification changes. A lot of
projects overrun their initial costs estimates due to serious changes of scope or project
specification.
 4) External factors – economic impacts can cause a project to overrun its estimates
seriously.

Ways to improve the process of costs estimation and budgeting:

1) Create an allowance for contingencies which are usually 5% or 10%
2) Contact an expert
3) Integrate risk management and contingency assessment.
4) Include peer reviews/estimate reviews.