A fast, accurate way to create project budgets on a large scale

Created on 2017-12-07 20:33

Published on 2017-12-07 22:35

How do you create your project budgets? Some people might pull up a fresh spreadsheet and make a matrix of the people and costs by month. Others might first develop a list of work packages and then ask the responsible parties to estimate their time/costs for each. Some power users might do all of this in MS Project (hats off to you!).

In a prior article, I showed how to measure the output of projects on a scale that correlates with spending on past projects. This model can be used to quickly and accurately estimate costs for future projects in a repeatable and transparent way.

This article is about the maturation of tools to deploy this on a large scale.

I led the development of a sophisticated Excel workbook that calculated the size of programs and translated this into detailed budgets for 10 different product groups spread across more than 50 technical centers around the world. We used this tool for 10 years to create every single project budget for more than 15,000 projects (with multiple iterations and scope changes) and more than $2,000,000,000 in engineering spend. That's right, 2 billion dollars! The accuracy was greater than 95% in mature centers.

You may be thinking that's a huge number of Excel files to manage. You're right. To make it more interesting, we had a dedicated team manage the files with password-protection to prevent bad behaviors and keep some sections private. We deployed massive folder structures in 3 different network systems over 10 years time (IT kept changing the systems). In the meantime, every revision to the core calculation required testing, and distribution to the core users. Through significant effort, we managed to keep it all working.

This related article explores the bigger picture of applying continuous improvement to product development processes.

We desperately needed a better tool and after years of seeking funding approval, we finally got the go-ahead to create a web-based application to replace the manual Excel/file management system. It was called the Global Engineering Budget Tool (GEBT). This was my primary project for a year of defining requirements, estimating costs, planning sprints in an Agile process and executing through user-acceptance testing. The development team was almost 20 people at the peak and was led by Rama Jena, Shivani Bhandarkar, Payal Pancholi, Amol Dalvi, Supreet Suhane and Pradyna Patil. I cannot thank them enough for their wisdom, patience, and dedication. During this time, the company experienced a major sell-off to a new joint-venture, a $20B spin-off, a $20B merger, and an abrupt CEO transition. However, the project was completed on-time and within budget!

For front-end users, the tool automates the measurement of program size, calculation of the budget, and approval of the budget. For core users, the GEBT was configurable for multiple product groups (PG) and technical centers (TC). Each PG/TC combination required unique program measurement details, resource types, labor rates, work hours per month, and much more. Core users can add PG/TCs with little or no help from the development team.

The flowchart below shows the overall life-cycle of a program budget and the portion managed by the GEBT.


Here is a short video demonstration of the front-end user experience.

https://www.youtube.com/watch?v=eOzwwohw1XI

Please connect with me if you'd like more information at: rick@crayneconsulting.com

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The series continues...

This is part of a series of articles about applying continuous improvement processes to measure and improve the performance of product development projects. Here is the complete list in recommended reading order.

  1. Are you still "negotiating" your project budgets? is a true story about a journey from budget hell to using EQUs to accurately estimate costs of engineering projects.
  2. Engineering Productivity Measures shows how engineering EQUs can be measured and applied to a wide variety of products, globally.
  3. Show me the Money! shares how to leverage engineering EQUs to benchmark performance and set targets to close gaps over time with significant savings.
  4. A fast, accurate way to create project budgets on a large scale, demonstrates a powerful web-based software tool to calculate EQUs and program budgets in just a few minutes.
  5. Applying Continuous Improvement to Product Development explores reasons why more organizations should take this path, but may need help to get started.
  6. Seeing productivity in 3D shows how EQUs can be used to unpack the value of experience, true cost-savings from off-shoring work, and how to better balance resources on a global basis.
  7. "True" Key Performance Indicators vs metrics shows how the right metrics can enable a long-term Continuous Improvement process.
  8. Does Six Sigma = Continuous Improvement? explores how Six Sigma contributes to Continuous Improvement, but does not guarantee it, and may actually harm it if done improperly.
  9. Connecting the Dots shows how to create reliable roadmaps with multiple impacts from multiple initiatives on a complex process used by multiple groups

Copyright 2018 Richard Crayne


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