IT project budget management

It is no secret that one of the major problems in the projects is the excess of terms and budget. Both the Contractor and the Customer suffer from this. The customer does not receive the expected result, and the Contractor does not receive the expected money. It would seem that a common problem should unite, but it often only drives in addition wedges of contention between the parties. Do you know how to ensure that deadlines and budget are always met? Me not. But we managed to achieve something in this direction. Before I talk about my experience, I would like to answer a few fundamental questions: what does the Customer want and what does the Contractor want when carrying out projects?


In our case, we will proceed from the fact that the Customer really wants to make a project. He has a certain budget, and he is not going to “throw”, but he is ready to pay the agreed money for the result obtained. It is clear that he wants to make as much as possible for his money. And when you make repairs at home, don't you want it? And as every owner hiring a team of builders, the Customer may suspect that the Contractor will inflate it to inflate the budget. What to do, this is our reality.
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What does the artist want? If this is not a scam, then in the overwhelming majority of cases, the project team wants to make a project, and management wants to receive contract money. But since the experienced Contractor knows what the Customer wants (see above), and also knows that the budget tends to end at the height of his desires, the Contractor seeks to maximize the budget.

Each of the parties, in its own way, is right. We have to put up with this and in such conditions, without finally agreeing, to begin projects. But the misunderstanding pledged at the very beginning of the project, as a rule, in the course of the project only increases and leads ... let's not talk about sad things. I will tell you about the principles and methods of project management used by us, which, one way or another, are related to meeting deadlines and budget. Perhaps, this will help someone to improve the quality of their own projects. Our specialization is the implementation of workflow automation projects on ECM platforms, such as EMC Documentum, Alfresco. Perhaps this has a certain specificity, but I hope, not fundamental for the topic discussed here.

Project scope

The first key point is the elaboration of the Project Framework (according to GOST - “Tactical and Technical Assignment”). The project scope is a document in which the Customer’s requirements for the system are written, but not as fundamental as the Terms of Reference. The functional framework of the project (Business requirements definition, BRD) is made up of a consultant / analyst - an employee of the Contractor’s project team - based on interviews with the Customer’s key specialists. The scope of the project is a complete understanding of all the tasks that need to be solved during the project, but without detail. The project framework is also a list of tasks that will not be solved during the project. Drawing up the project framework takes 1 - 2 weeks. The same can take coordination and clarification. I pay attention that at this moment there is no contract yet and there is no project. And this is a risk, because the project may never begin. Who will pay for the work of the Contractor for the preparation of the framework, assessment, planning, budget preparation? I propose to answer this question on your own. Perhaps answers to the questions asked above will help: what the Contractor and the Customer want in your case. I can only say that the estimates of terms and budget obtained without working through the framework of the project are fantasies that have no relation to reality. No wonder that during the project, the budget and terms creep, go, fly.

Architecture study

After coordination of the functional framework with the Customer, the consultant transfers them to the architect. That architect, who later will do the project. The architect studies the scope of the project, asks the consultant questions and thinks over the architecture of the solution as a whole and the implementation of each specific requirement is the second key point. As a result, a couple of paragraphs of the text of the overall architecture appear - which technologies are supposed to be used - and a couple of sentences for each requirement - which components are proposed to be developed and what labor intensity is expected in days. In essence, this is the “Sketch Project”. But, if in accordance with GOST “Stage 4. Sketch Design” goes after “Stage 3. Technical Task”, then in this case we change the stages in places, because without the elaboration of the architecture, we cannot make a reliable estimate of the complexity. Sometimes we make it a separate document - “Assessment”, in which we fix the assessment and the proposed implementation. Sometimes this is done in the form of comments to each requirement in the project framework document. Estimation of the architect usually takes 2-5 days. Questions arising from an architect may uncover aspects not developed by a consultant and require additional study. This is great because reduced risk of these problems during the project. The architect can do the study of architecture and the formation of questions independently. But the final meeting on the discussion and assessment of requirements is carried out by the project team together, at least as part of: a consultant, an architect, a project manager.

The architectural constraints of the system arising from the solution are also recorded in the project framework document. In addition, the document records events that are significant for the project - the necessary resources that the Customer must provide, the time needed to prepare equipment, training classes, etc.
The project framework template can be found here: http://www.sinera.ru/methods .

Work planning

After the requirements have been worked out and their implementation is understood, preliminary work and resources are planned - the architect determines which implementers for the implementation of certain requirements can be attracted, in what order the requirements are met, and the interdependencies between the requirements exist. All information is accumulated by the project manager, transferring it to the project plan. At this point, the timing of the project is born . First, all the work line up linearly. Further tasks are distributed among the resources. Based on the wishes expressed by the Customer in terms of time, as well as from the optimal combination of attracted resources, the duration of the project is determined. The “optimal combination of attracted by the resource” means a simple idea - the project timeline should be minimal, people should be attracted as little as possible, but they should be fully involved. So there are estimates of the duration of stay of people on the project, which are the basis for budgeting the project.

We do work planning in MS Project.

I almost forgot an important point.
In the work plan, we put down the complexity of the execution of a task. Estimates issued by the architect can only be used in conjunction with an understanding of who will implement these requirements. We should have specific names of people. And from whom we are specifically involved in this task, the adjustment of the assessment of this task, issued by the architect, will depend. To adjust the assessment it is important to know the productivity of each individual developer. This is the third key point. More information on how to determine productivity can be found, for example, in Joel Spolsky in the books “Joel on Programming” and “Joel. And again about programming " (Chapter 20. Planning with regard to past results (EBS).

The same applies to the rest of the work - installation of the system, preparation of technical specifications, testing, etc. In order to know how much work will take time, we need to know who will do this work. In fact, for project planning and evaluation, we need to put together a project team.

Budget estimate

As a result of work planning, there are roles and people involved in the project and the duration of their stay on the project. Further calculations I, as a project manager, do in the Excel spreadsheet. Like that:

RP (Pashinin)	five	0.5	2.5	420	2000 r.	336 000 r.	840,000 p.
Lead Consultant (Pleshkova)	four	one	four	672	1400 r.	235 200 p.	940 800 p.
Architect (Shapovalov)	five	one	five	840	1400 r.	235 200 p.	1,176,000 p.
Consultant (Korh)	four	one	four	672	1100 r.	184 800 p.	739,200 p.
Ved.Razrabotchik (Kharitonov)	3	one	3	504	1400 r.	235 200 p.	705 600 p.
Developer (Kolesnikov)	3	one	3	504	1100 r.	184 800 p.	554 400 p.
							4,956,000 p.

As a result, the project budget appears. Planning and budgeting takes about another 2-3 days.

The fourth key point in drawing up the budget is that we are moving from the laboriousness of the tasks set out in the plan to the duration of attracting resources . The logic is simple. The main item of expenditure of the Contractor is the remuneration of staff. If people are on the project longer than the paid time, the Contractor’s company incurs direct losses. Therefore, it is this parameter that must be planned and controlled. If project budgeting and control are not carried out on the basis of the length of stay of people, but on the basis of an assessment of the tasks, then you can be sure that the rates of specialists are too high risks to not worry about the actual planning of resources .

Refinement of the framework, deadline, budget

As a result of the work done, we received the documents:

• Project scope agreed with the customer
• Evaluation of the project with the proposed architecture and the capital intensity of the requirements
• Project plan
• Project's budget

This is a complete understanding of what needs to be done, how it is supposed to be done, how long it can take and how much it will cost.

All four results must be submitted to the customer. Project budget and deadlines are the parameters on the basis of which the Customer will decide. Requirements is a parameter that the Customer and the Contractor will manage to adjust the budget and deadlines. Since the budget estimate is completely transparent, to reduce the time and budget, you can only throw out or reduce the requirements. We do not have a valuation estimate for each requirement, therefore we are guided by the laboriousness of implementation, assessed by the architect. After the revision of requirements, the project manager makes re-planning, guided by the same principles: the minimum time - the optimal loading of resources. After rescheduling, the budget is adjusted. The scope, timing and budget are the subject of the contract.

All the work on the formation of the framework, planning and evaluation took us 2-6 weeks. Have you already answered the question who pays for it? In my opinion, both the Contractor and the Customer must pay. The readiness of the Customer to bear the expense of the assessment indicates the seriousness of intentions in the implementation of the project. Expenses of the Contractor, more precisely the performance of work at cost or below it, indicate its interest in the project. This motivates him to make an assessment in the shortest possible time, because this is work at a loss now, but with maximum elaboration, since these are his risks in the future. In each case, the situation may differ.

Term and budget management

We completed the assessment, agreed on a budget and deadlines. Ready to enter into a contract and performance of work. But it is necessary to answer one more question - what does the Contractor sell to the Customer? On the one hand, he sells the result, because the contract contains the scope of work that the Contractor undertakes to perform. This is a fix price agreement. On the other hand, he sells resources because the budget is drawn up on the basis of the duration of resource attraction, i.e. "Time & materials". These are different types of relationships. But we must understand that the thoroughness of the assessment, the concerns of the Customer about exceeding the budget, and the Contractor about a possible change in the requirements have not gone away. Certain agreements between the Customer or the Contractor on the principles of change management can help to remove concerns and resolve contractual contradictions. Their essence is as follows:

• The contractor guarantees the implementation of the project in the stipulated time frame and budget, in case the scope of the project is not changed.
• The Contractor guarantees that if the work is performed ahead of time, the Contractor’s employees, if necessary, will continue to work on the project within the framework of the paid budget on additional tasks.
• If during the project there is a change or non-compliance with the project framework, but they do not entail a change in terms and budget, the obligations of the Customer and the Contractor remain within the framework of the contract.
• If the changes made to the project framework entail additional resource mobilization, then an additional agreement is drawn up and the Customer pays for work that exceeds the initial budget.

With this approach, the Contractor can not get additional income due to budget savings, as it is forced to work it out to the end. At the same time, the Customer has an additional clear incentive to retain the framework, since in case of their change, and accordingly, the project is exceeded, it will pay for the additional time of the Contractor’s specialists. If the Contractor honestly fulfills its obligations on the allocation of resources, then the main criterion for customer satisfaction is the qualification of the Contractor’s specialists. The same factor is one of the most important for the success of the project.

Let's sum up. Key points of compliance with the budget and deadlines are laid at the very beginning of the project during the evaluation and are fixed in the contract:

1. To estimate the time and budget it is necessary to make a thorough study of the project framework. It takes time.
2. During the assessment of the complexity of the tasks, the architecture of the proposed solution is worked out, which is recorded in writing.
3. Planning the complexity of the tasks is based on the productivity of those professionals who will perform these tasks. Productivity is a parameter calculated by previous projects for each specialist.
4. The budget is calculated based on the duration of the resources on the project.
5. The functional requirements, architectural restrictions, as well as the Customer’s obligations critical for the execution of the project by the Contractor on time are introduced into the project framework.
6. The contractor undertakes to timely allocate quality resources in full for the time specified in the contract for the implementation of the project framework. The customer undertakes to allocate an additional budget, in case changes during the project lead to an increase in time and budget.

In the future, during the development of the technical specifications, in the design and implementation of the system, it remains only to closely monitor compliance with the project framework and compliance with mutual obligations.

Good luck on the projects!