Last updated on Aug 13, 2024
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What is WBS?
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How to create WBS?
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How to use WBS to estimate project costs?
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How to control project costs using WBS?
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What are the benefits of using WBS to estimate project costs?
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Here’s what else to consider
Estimating project costs is a crucial step in planning and managing any project. Without a realistic and accurate budget, you risk overspending, underdelivering, or losing control of your project scope. One of the most effective tools for estimating project costs is the work breakdown structure (WBS), a hierarchical decomposition of the project deliverables and activities. In this article, you will learn how to use WBS to estimate project costs in the context of the Project Management Body of Knowledge (PMBOK) framework.
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- Aleixo Fernandes Director of Strategy and Marketing | Project Management | Microsoft Power BI | Primavera Cloud | Last Planner System |…
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- David Hamilton, MBA, PMP®, LSSBB Ohio Department of Rehabilitation and Correction
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- Shivani Seunarine I believe that practice makes perfect so I teach in order to constantly improve my skills. Project Management…
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1 What is WBS?
WBS is a graphical representation of the project scope that divides it into smaller and manageable components. Each component, or work package, represents a distinct unit of work that can be assigned, tracked, and measured. WBS helps you to define the project scope, identify the required resources, and establish the project schedule. WBS also provides a basis for estimating project costs by breaking down the project into measurable and quantifiable elements.
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- Aleixo Fernandes Director of Strategy and Marketing | Project Management | Microsoft Power BI | Primavera Cloud | Last Planner System | Artificial Intelligence (AI)
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In my role as a Strategy and Marketing Director, leveraging Work Breakdown Structure (WBS) for project cost estimation is a cornerstone of effective project management. Breaking down complex projects into manageable components facilitates a granular understanding of resource needs. WBS, in my view, is not just a tool; it's a strategic compass. Each work package within the structure becomes a cost nucleus, allowing for accurate estimation. Additionally, WBS fosters transparency, making it easier to identify potential cost overruns or adjustments. It's not merely a static blueprint; WBS is a dynamic guide, evolving as the project progresses.
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- David Hamilton, MBA, PMP®, LSSBB Ohio Department of Rehabilitation and Correction
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A WBS is an essential artifact of project management. It decomposes the scope by identifying summary tasks and sub-tasks. By decomposing it, accurate cost estimates may be assigned to each work-package. The accuracy is provided by determining the activity level, assigning resources, and producing a schedule. Then, the sub-tasks can be rolled up for budget planning. Furthermore, an initial WBS may provide enough information for expert judgment, based on similar initiatives, to determine a rough order of magnitude.
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See AlsoCost Objects In Activity Based CostingCost Objects, Cost Drivers, And Cost Pools - FasterCapitalCost Centre and Cost Unit – Introduction, Definition and FAQsSAP R/3 Authorizations GlossaryLove
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- Shivani Seunarine I believe that practice makes perfect so I teach in order to constantly improve my skills. Project Management Practitioner| Facility Manager Practitioner| Agile Practitioner | Trainer |Business Owner
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In my experience the wbs clearly documents all deliverables and tasks and sometimes subtasks. Once done properly cost resource schedule and everything else follows successfully in planning.
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- Vishnu KAUSHIK, PMP®, RMP®, PRINCE2® Project Controls Specialist @ Fluor Corporation | Master of Project Management
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A Work Breakdown Structure (WBS) is a key tool in project management that breaks down a project into a hierarchy of deliverables and tasks. Here’s how you can use it to estimate project costs:1.List your project’s high-level deliverables: Start by listing out what you’ll need to deliver to meet your project’s end goal.2.Break each deliverable down into tasks: Each deliverable should be broken down into smaller tasks.3.Get granular with subtasks: Break down tasks into subtasks.4.Estimate the cost at the work package level: Project costs are estimated at the work package level.
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- João Paulo Paiva Silva Especialista em Gestão de Projetos PMO | Analista de Sistemas T.I | PL/SQL Dev | Product Owner | Scrum Master | LSS Green Belt
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A Estrutura Analítica do Projeto (EAP) é uma representação gráfica do escopo do projeto que o divide em componentes menores e gerenciáveis. Cada componente, ou pacote de trabalho, representa uma unidade distinta de trabalho que pode ser atribuída, controlada e medida. A EAP ajuda-me a definir o escopo do projeto, identificar os recursos necessários e estabelecer o cronograma do projeto. Além disso, fornece uma base para estimar os custos do projeto, dividindo-o em elementos mensuráveis e quantificáveis. Em suma, a EAP é essencial para uma gestão eficaz do projeto, facilitando o planejamento, a execução e o controle das atividades.
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2 How to create WBS?
Creating WBS involves identifying and grouping the project deliverables and activities into hierarchical levels. The first level is the project itself, followed by the major deliverables or phases. The lower levels are the sub-deliverables or tasks that contribute to the higher-level components. The lowest level of WBS is the work package, which is the smallest unit of work that can be estimated and assigned. To create WBS, you can use various methods, such as brainstorming, mind mapping, or using templates and software tools. The key is to ensure that WBS is comprehensive, clear, and consistent with the project scope statement and the stakeholder requirements.
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- Shivani Seunarine I believe that practice makes perfect so I teach in order to constantly improve my skills. Project Management Practitioner| Facility Manager Practitioner| Agile Practitioner | Trainer |Business Owner
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So here is how I advise persons to create a Work Breakdown structure. Use the following processes groups as your deliverables and then drill down into tasks. The following can be the deliverables1. Completion of Initiation Phase2. Completion of Planning Phase3. Completion of Execution Phase4. Completion of Closeout PhaseI have also substituted the execution deliverable for what the project is. Example of Project is Baking a cake then the execution deliverable is Completion of Baking Phase.
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- João Paulo Paiva Silva Especialista em Gestão de Projetos PMO | Analista de Sistemas T.I | PL/SQL Dev | Product Owner | Scrum Master | LSS Green Belt
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Na criação da Estrutura Analítica do Projeto (EAP), o processo envolve identificar e agrupar os resultados e atividades do projeto em níveis hierárquicos. Começo com o projeto em si, seguido pelas principais entregas ou fases. Os níveis inferiores são os subentregáveis ou tarefas que contribuem para os componentes de nível superior. O nível mais baixo é o pacote de trabalho, a menor unidade de trabalho estimável e atribuível. Para criar a EAP, recorro a métodos como brainstorming, mapeamento mental ou uso de modelos e ferramentas de software
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3 How to use WBS to estimate project costs?
Using WBS to estimate project costs involves applying various cost estimation techniques to each work package and aggregating the results to obtain the total project cost. Analogous estimation, for instance, uses historical data from similar projects to estimate the current project costs. Parametric estimation, on the other hand, relies on mathematical models or formulas to estimate the project costs based on relevant parameters or variables. Bottom-up estimation uses detailed estimates of each work package and adds them up to get the project cost. Three-point estimation involves using optimistic, pessimistic, and most likely estimates of each work package and applying a weighted average to get the project cost. Expert judgment is when opinions and experience of experts or subject matter experts are used to estimate the project costs. The choice of which technique to use depends on the availability and reliability of the data, the complexity and uncertainty of the project, and the level of accuracy and precision required. Combining multiple techniques can also improve the validity and credibility of your estimates.
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- A. Hoss, PMP PMP | PSM | Project Management Coach | Strategic Planning Consultant
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To estimate project costs using a Work Breakdown Structure (WBS), first break down the project into smaller, manageable work packages. Each work package should represent a distinct deliverable or task. Assign resources and estimate the time required for each task, then calculate the cost based on resource rates and duration. Sum the costs of all work packages to get a total project estimate. The WBS ensures that all aspects of the project are accounted for, leading to more accurate and detailed cost estimates.#ProjectManagement #WBS #CostEstimation #PMBOK
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4 How to control project costs using WBS?
Using WBS to estimate project costs is not enough; you also need to monitor and control the project costs throughout the project life cycle. WBS helps you to control project costs by providing a baseline for measuring and reporting the project performance. You can use WBS to track the actual costs incurred for each work package and compare them with the estimated costs. You can also use WBS to identify and analyze any variances or deviations from the budget and take corrective actions to prevent or minimize cost overruns. WBS also helps you to communicate and report the project cost status and progress to the stakeholders and sponsors.
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5 What are the benefits of using WBS to estimate project costs?
Estimating project costs through WBS can provide several advantages for your project management process. For example, it can improve the accuracy and reliability of cost estimates by breaking down the project into measurable and manageable units. Additionally, it can enhance visibility and transparency of the project scope and deliverables by showing the relationship and dependencies among work packages. WBS also facilitates resource allocation and optimization by recognizing the required skills, materials, equipment, and time for each work package. Moreover, it supports the integration and alignment of cost estimates with the project schedule, scope, quality, and risk management plans. Ultimately, WBS increases stakeholder confidence and satisfaction by demonstrating your ability to plan, manage, and control project costs. Therefore, utilizing WBS to estimate project costs is a key practice in successful project management.
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Here are the benefits of using a WBS for defining project costs:1. Detailed Cost Breakdown: The WBS allows for a detailed breakdown of costs associated with each task. This granularity ensures that all costs are accounted for and helps create a more accurate budget.2. Budget Tracking: By associating costs with specific tasks, the WBS makes it easier to track expenses against the budget throughout the project lifecycle.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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- David Hamilton, MBA, PMP®, LSSBB Ohio Department of Rehabilitation and Correction
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A WBS, hierarchical chart or Gantt, can be used to keep the project team on task. It allows stakeholders to see the scope of the project, what has been done, what work is being done now, and the future work to be done. According to PMI (2021), the WBS is a requirement in the scope baseline. It maintains stakeholder expectations, while minimizes gold plating and scope creep.
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Using Work Breakdown Structure (WBS) for cost estimation in renewable energy projects involves breaking down tasks and assigning costs. In subsea wind projects, WBS segments cover installation, cabling, and maintenance, aiding accurate cost projections. Offshore substations' WBS includes design, construction, and commissioning, streamlining cost estimates. WBS for grid connection studies in onshore substations details tasks like feasibility analysis, optimizing cost assessments. Effectively utilizing WBS ensures comprehensive cost estimation, enhancing budget accuracy in diverse aspects of renewable energy projects.
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Project Management Body of Knowledge (PMBOK)
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