Project Planning: Estimate, Budget, and Forecast

The project planning process starts with a proposal estimate & taking the time & effort to make a great proposal plan is your best shot for project success.

6 minute read

What is Project Planning? - Estimating New Work (Proposal)

The project planning process starts with a proposal estimate. Taking the time and effort to make a great proposal plan is a sure way to give the executing team the best shot for project success. The proposal estimate will have scope, schedule, and a cost. Understanding the scope is the first step. Utilizing a statement of work (SOW) or any document from your customer with the work required will establish the scope to be bid. Missing work can lead to schedule delays and cost overruns. Scope comprehension is hard when timelines to submit proposals are short. Associated with scope are the resources needed to execute and when those resources are available. The when and who make up the schedule and the cost portion of the estimate. Since your projects may be similar it is also advised to have a tool that can clone, utilizing a template, the project information, tasks, timelines, and the budget or estimate.

Steps for completing the project proposal estimate:

  • Understand the scope. Scope comprehension is the key to accurate estimating
  • Utilize the project template to clone or populate the project information, the past estimates, and the timelines for the tasks
  • Establish a work breakdown structure (WBS)
  • Estimate the resources needed to complete the work
  • Understand the timing of needed resources
  • Include all materials, services, and travel required
  • Time phase the estimates
  • Ensure that the right skill set is available when you need them
  • Use To Be Determined (TBDs) if the name of the resource is not yet available
  • Gain buy-in from the proposal team and the functional departments before submission to the customer.

Once the proposal is sent to the customer and negotiated, (YIPPEE, you won the project!!) it is handed over to a project manager to execute. Since a great project proposal estimate was developed by following the steps above, the project manager now has clear defined scope of work to execute, and an achievable resource plan with currently available resources.

Work Breakdown Structures (WBS)

A WBS is a hierarchical decomposition of the work to be accomplished on a project. It is typically outcome or product based and should make the management of scope, schedule, and cost much easier.

A WBS should be created in the proposal phase of the project. During the proposal phase the WBS may stop at the task level. It is during execution that the detail is added to the WBS.

As you can see from the visual, the work is broken down into manageable chunks. The advantages of utilizing a WBS are below:

  • Work is broken apart, so task management can be spread out amongst the project team
  • Provides a visual representation of the project
  • Provides the structure for scheduling, costing, and reporting on the project
  • Gives a repeatable backbone for future projects
  • Helps with scope management—comprehension in initiation phase and minimizes scope creep in execution

Scope, Schedule, and Budget

Scope comprehension is one of the toughest activities that both a proposal team and a project team must tackle. It sounds simple, but with complex projects it can be difficult, because clarity of what will be delivered and what outcomes are expected are often not adequately described. Associated with scope are the resources needed to execute and when those resources are available. Scope is tracked in a document called a statement of work (SOW). The SOW gives the teams the bones of the project and typically it has a reference number with each requirement. The reference number makes it easy to track. In fact, the SOW reference number can be attached to a task, subtask, or work package so that with a simple report, you can cross reference to ensure all scope is covered.

Scope creep is a continual problem and you must work hard to avoid adding scope without the associated budget and authorization. A robust change management process will help keep that from happening. Make sure your change management policies and procedures are up-to-date and that the teams have had role-based training to understand their part in the process. Since your projects may be similar, it is also advised to have a tool that can clone, utilizing a template, the project information, tasks, timelines, and the budget or project proposal estimate.

During the proposal phase make sure you have a thorough scope review with all stakeholders in the SAME physical or virtual room. If you miss scope during the proposal phase the impact will be passed down to the execution team. Missing scope on a contract takes money right out of your pocket so make sure you understand what your customer wants.

A proposal and a project schedule are a must. The task need-by dates establish the schedule that provides the basis of the cost. In a professional services company, the budget and resultant cost are driven by PEOPLE so our next section is on planning your resources.

Resource Planning

“Right People, Right Time, Right Task.” This is especially true in professional services firms where people are the primary driver of revenue, and the primary contributor to cost.

People really are the most important asset a company has, yet so many companies struggle to truly manage this resource. Many times, resource planning is done too late in the process to make a difference and the result is behind schedule and over cost projects. Even if proposal and project managers want to plan their resources, the reality is that most resource planning is done ad-hoc with Excel files at the project level. There is no consideration of skills or what other projects need, and there is no clue what new work will require from a resource perspective.

Below are 7 simple tips to help increase the efficiency of managing resources across the enterprise:

  • Have a centralized repository for all resource plans that is accessible for all stakeholders
  • Create a skills catalog so that the right resources will be available when (and where) you need them
  • Forecast resources throughout the project lifecycle, don’t just start at contract award
  • Use a single pool of resources across your company, not just on one project or portfolio
  • Plan at the project level and roll-up to the enterprise—do not forecast by department only
  • Provide stakeholders real-time resource demand and Key Performance Indicators (KPIs) reports as well as role-based dashboards
  • Don’t plan your most important resources on disparate Excel spreadsheets
  • Project Planning: The Importance of a Tool That Provides Real-Time Data

Use a tool that enables all project stakeholders to visually see the availability, utilization, and time phasing of the resources. This level of visibility and control will help maximize overall performance and profitability of the project because clarity of what will be delivered and what outcomes are expected are often not adequately described for all stakeholders, but critical factors against which the success of the project will be measured.

Resource Management Basic Information

Metrics for resource planning/management MUST be real-time. Old data will not help you make great decisions, and can result in very costly ones.

At a minimum, you should be able to answer the following questions:

  1. What utilization do you need to be profitable?
  2. What utilization should you aim for to avoid burnout?
  3. What is your actual billable and non-billable utilization?
  4. Is your project probability up-to-date so that your people forecasting most accurately reflects the most likely billable revenue and utilization?

Estimate-at-Complete (ETC)

As the project progresses things will change from the original plan. A key resource may win the lottery or be needed on a higher priority project, and when this happens the forecast must be updated.

The EAC is the total actuals expended on the project + the dollarized time phased resources needed to complete the work. That time phased resource plan for work to be completed is called the Estimate-to-Complete (ETC). EAC and ETC can’t live without each other.

EAC = Actuals + ETC

The EAC is a forecast of the project’s cost when the work is complete. Throughout the project plans may change, the resources may change too, and it is the responsibility of the project manager to revise the work and replan tasks to best accomplish the end goal.

Master the Project Planning Process with Unanet

ERP software like Unanet can help streamline your entire project planning process, from estimate to budget to forecast. Our project management system is a single solution filled with invaluable tools that provide real-time insights and data to get your business where it needs to go. Learn more in our eBook, Selecting an ERP for Professional Services, and our white paper, 9 Simple Steps to Convince Your Leaderships to Adopt Project Portfolio Management (PPM).