One of the important things to understand is the process of developing a plan. We will talk about top-down planning and bottom-up planning. These are not mutually exclusive and neither is the “right” way. What are these? Both start with a project scope and statement of work. The top-down process is when the executive and higher management create a budget and schedule based upon their experience, historical data, and usually, business restrictions. The bottom-up process is when the people who are going to do the project or their representatives start by creating a detailed WBS with all the tasks required to do the project. They then estimate the cost and time required to do each of the tasks. This is then rolled up to produce a complete plan. I believe you will all agree that these two processes may not produce the same plan. Which is the correct one? Both have their advantages and disadvantages. There may be circumstances that affect the decision of which to use.
Estimates are typically formed using a combination of estimated costs for labor and materials, combined with allowances for indirect costs such as inventory costs and overhead. Although seemingly simple in nature, estimating is a complex process which demands significant effort if realistic project budgets are to be developed. There are several models for refining estimation accuracy, which are discussed in the following sections.
The Work Breakdown Structure (WBS) is made up of components called work units. Each work unit must:
• Have a relatively short time span
• Have definite beginning and end points
• Have criteria for evaluating performance
• Be budgetable in terms of money, time, and resources
• Be a single, meaningful job, for which individual responsibility can be assigned
• Use people who will be responsible for the work
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