IT project budget management

It is no secret that one of the serious problems in the projects is exceeding the deadlines 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 the common problem should unite, but it often only drives extra wedges of discord between the parties. Do you know how to ensure that deadlines and budgets are always met? Me not. But we managed to achieve something in this direction. Before telling about my experience, I would like to answer a few fundamental questions: what does the Customer want and what does the Contractor want when implementing 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 is ready to pay the agreed money for the result. It is clear that he wants to do as much as possible for his money. And when you do home repairs, don't you want this? And like every owner who hires a team of builders, the Customer may suspect that the Contractor will inflate it, inflate the budget. What to do is our reality.

What does the Contractor want? If this is not a scam, then in the vast majority of cases, the project team wants to make a project, and the management wants to get contract money. But since an experienced Contractor knows what the Customer wants (see above), and also knows that the budget tends to end in the midst of his desires, the Contractor seeks to inflate the budget as much as possible.

Each of the parties, in its own way, is right. One has to put up with this and in such conditions, without finally agreeing, start projects. But the misunderstanding laid down at the very beginning of the project, as a rule, only increases during the project and leads ... let's not talk about sad things. I’ll tell you about the principles and methods of project management used by us, which, one way or another, are relevant to meeting deadlines and budgets. Perhaps this will help someone 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 it is unprincipled for the topic considered here.

Project scope

The first key point is the elaboration of the Project Framework (according to GOST - “Tactical and Technical Assignment”). The scope of the project 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 drawn up by a consultant / analyst - an employee of the Contractor's project team - based on interviews with key specialists of the Customer. 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 scope of the project is also a list of tasks that will not beresolved during the project. Drawing up a project framework takes 1 to 2 weeks. Coordination and refinement may take as much. I draw your attention to the fact that at this moment there is no contract and no project. And this is a risk, because the project may never start. Who will pay for the Contractor's work on drawing up a framework, assessment, planning, budget preparation? I suggest you answer this question yourself. Perhaps the answers to the questions asked above will help: what do the Contractor and the Customer want in your case. I can only say that the estimates of the terms and budget obtained without elaborating the project framework are fantasies that are not related to reality. It is not surprising that during the project the budget and deadlines crawl, travel, fly.

Architecture Design

After coordination of the functional framework with the Customer, the consultant passes them to the architect. To the architect who will later do the project. The architect studies the scope of the project, asks questions to the consultant 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 general architecture appear - what 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 a “draft design”. But, if according to GOST“Stage 4. Sketch project” comes after “Stage 3. Terms of reference”, then in this case we change stages, because without a study of 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 on each requirement in the Project Framework document. The evaluation of the architect usually takes 2-5 days. Questions arising from the architect may reveal aspects not worked out by the consultant and require additional study. This is great because The risks of these problems during the project are reduced. The architect can do the elaboration of architecture and the formation of questions on his own. But the project team holds the final meeting to discuss and evaluate requirements together,

The architectural limitations of the system arising from the solution are also fixed in the document “Project Framework”. In addition, the document records events that are significant for the project - the necessary resources that the Customer must provide, the timing of the preparation of equipment, training classes, etc.
The project framework template can be viewed here: http://www.sinera.ru/methods .

Work planning

After elaboration of the requirements and understanding of their implementation, preliminary planning of work and resources is carried out - the architect determines which executors can be involved in the implementation of certain requirements, in what order it is critical to fulfill the requirements, and what interdependencies exist between the requirements. All information is accumulated by the project manager, transferring it to the project plan. At this moment, the project dates are born . At first, all the works line up linearly. Then the tasks are distributed by resources. Based on the wishes expressed by the Customer on the timing, as well as from the optimal combination of attracted resources, the duration of the project is determined. By “optimal combination of resources attracted” we mean a simple idea - the project timeframe should be minimal, as few people as possible involved, but they should be fully involved. So there are estimates of the duration of people’s stay 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 terms of work, we put down the complexity of performing a particular task. Assessments issued by an architect can only be used in conjunction with an understanding of who will implement these requirements. We should have specific names of people. And the assessment adjustment will depend on who exactly we are attracting to this task.this task, previously issued by the architect. To adjust the score, it is important to know the productivity of each particular developer. This is the third key point. You can read more about how to determine productivity, for example, in Joel Spolsky in the books Joel on Programming and Joel. And again, about programming. ” (Chapter 20. Planning for previous results (EBS).

The same applies to the rest of the work - installing the system, preparing technical specifications, testing, etc. In order to know how much time it will take, we We need to know who will do this work.In fact, to plan and evaluate a project, we must assemble a project team.

Budget estimate

As a result of work planning, roles and people participating in the project and the duration of their stay on the project appear. As a project manager, I do further calculations in an Excel spreadsheet. Like that:

RP (Pashinin)	5	0.5	2,5	420	2000 p.	336 000 p.	840 000 p.
Leading Consultant (Pleshkova)	4	1	4	672	1400 p.	235 200 p.	940 800 p.
Architect (Shapovalov)	5	1	5	840	1400 p.	235 200 p.	1 176 000 p.
Consultant (Korch)	4	1	4	672	1100 p.	184 800 p.	739 200 p.
Lead Developer (Kharitonov)	3	1	3	504	1400 p.	235 200 p.	705 600 p.
Developer (Kolesnikov)	3	1	3	504	1100 p.	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 budgeting is that we are moving from the complexity of the tasks set out in the plan to the duration of attracting resources . The logic is simple. The main item of expenses of the Contractor is the remuneration of staff. If people are on the project longer than the paid time, then the Contractor’s company incurs direct losses. Therefore, it is precisely this parameter that must be planned and controlled.If the budgeting of the project and its control is carried out not on the basis of the duration of the people’s stay, but on the basis of an assessment of the tasks, then you can be sure that the rates of the experts include too high risks so as not to worry about real resource planning .

Clarification of the scope, term, 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 complexity of the requirements
• Project plan
• Project 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 presented to the Customer. The project budget and deadlines are the parameters on the basis of which the customer will make a decision. 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 lower requirements. We do not have a valuation of each requirement, so we focus on the complexity of the implementation, as estimated by the architect. After reviewing the requirements, the project manager performs re-planning, guided by the same principles: the minimum time - the optimal load 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 willingness of the Customer to bear the cost of evaluation indicates the seriousness of intentions in the implementation of the project. The costs of the Contractor, or rather the performance of work at or below cost, indicate his interest in the project. This motivates him to make an assessment as soon as possible. this is a loss job now, but with the maximum study, because these are his risks in the future. In each case, the situation may vary.

Time and Budget Management

We performed an assessment, agreed on a budget and deadlines. Ready for a contract and 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” type contract. On the other hand, he sells resources, because the budget is compiled on the basis of the duration of the attraction of resources, i.e. "Time & materials". These are different types of relationships. But we must understand that the thoroughness of the assessment, the fears of the Customer about exceeding the budget, and the Contractor about a possible change in requirements have not gone away. Certain agreements between the Customer or the Contractor on the principles can help to remove fears and resolve contractual contradictions.change management . Their essence is as follows:

• The Contractor guarantees the implementation of the project within the agreed time and budget, in case the scope of the project is not changed.
• The Contractor guarantees that if the work is completed ahead of schedule, the Contractor’s employees, if necessary, will continue to work on the project within the framework of the paid budget for additional tasks.
• If during the project there is a change or non-observance of the project framework, but they do not entail changes in the terms and budget, then the obligations of the Customer and the Contractor remain under the contract.
• If changes made to the project framework entail additional attraction of resources, an additional agreement is drawn up and the Customer pays for work in excess of the initial budget.

With this approach, the Contractor cannot get additional profit 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 maintain the scope, because in case of their change, and accordingly, exceeding the terms of the project, he will pay extra time for the Contractor’s specialists. If the Contractor honestly fulfills its obligations regarding 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.

To summarize. The key points of budget compliance and deadlines are laid at the very beginning of the project during the assessment and are fixed in the contract:

1. To evaluate the time and budget, it is necessary to carefully study the scope of the project. It takes time.
2. During the assessment of the complexity of the tasks, the architecture of the proposed solution is being worked out, which is recorded in writing.
3. Planning the complexity of tasks is based on the productivity of those specialists who will perform these tasks. Productivity is a parameter calculated from previous projects for each specialist.
4. The budget calculation is based on the duration of the resources on the project.
5. The project includes functional requirements, architectural restrictions, as well as the obligations of the Customer, critical for the execution of the project by the Contractor on time.
6. The Contractor undertakes obligations for the timely allocation of high-quality resources in full for the terms stipulated in the contract for the implementation of the project framework. The customer assumes the obligation to allocate an additional budget in case changes in the course of the project lead to an increase in terms and budget.

In the future, during the development of technical specifications, when designing and implementing the system, it remains only to clearly monitor compliance with the project framework and compliance with mutual obligations.

Good luck on the projects!