I'm sure this title gets all the PMI^® big wigs a little edgy!  And for all of those PMBOK toters, you can now pick up your book (as I'm sure it just hit the floor!) and read the following article about real world project management.

What is a WBS?

WBS stands for Work Breakdown Structure.  Examining PMBOK^®, we see that the WBS should be created after the scope of the project has been defined.   Creating a WBS involves subdividing the major project deliverables and project work into smaller more manageable components. (PMBOK pg 49)

The planned work contained in the lowest-level WBS components are called Work Packages (PMOK^® pg 112)

We can all agree with this, right?

But here's the piece that most people miss, or don't fully realize when talking about developing a WBS; the Work Packages should be decomposed one level farther to determine the Activities. (PMOK^® pg 127)  This step is like "the missing link"; connecting the WBS to your Schedule Network Diagram (or MS Project).  This is formally called Activity Definition.

What is Activity Definition?

Activity Definition is the process of identifying and documenting the work that is planned to be performed. (PMOK^® pg 127)  And once we know the scope of our project, isn't this the next biggest question; "What do we have to do to complete this project?"

So why is the WBS Over-Rated?

Well, if you are studying for the PMP exam or about to undertake a large project, it is not.  It is very important.

But the WBS is nothing more than a tool.  A tool to help you determine the activities that need to occur to complete the project.

So now lets examine this scenario;  You have been assigned as the project manager for some project.  The scope is well defined and the project sponsor as well as management believe this project could be completed in 3-6 months.  Your team of 6 Subject Matter Experts has been determined.  You have transferred the vision (scope) of this project to your team and are now about to hold your first planning session.  All SME's will participate in this meeting.  Given this scenario, a formal WBS may be over-kill.  A simple brainstorming session with the team could allow you to determine all the project activities.  In short, you will be performing Activity Definition without the need for a formal WBS.

You may even be able to perform Activity Sequencing during the same session!  This is the process of putting all of the activities in sequential order by establishing the logical relationship between the various activities.  And inevitably, this process of Activity Sequencing (especially when completed with the team), will uncover more activities that need to occur.

Closing

In closing, I'd just like to state that I'm not advocating eliminating the development of a WBS, I'm merely stating that in many real world projects, a formal WBS may not be needed.  I believe project management tools and processes should be scaled to fit the project.  And if the detailed activities of the project can be determined without the need for additional work, then why do it?

What is a Contingency Reserve

According to PMBOK^® (page 166 of the Third Edition), "Contingency Reserves are estimated costs to be used at the discretion of the project manager to deal with anticipated, but not certain, events. These events are "known unknowns" and are part of the project scope and cost baselines."

PMBOK goes on to say "One option to manage cost contingency reserves is to aggregate each schedule activity's cost contingency reserve for a group of related actities into a single contingency reserve that is assigned to a schedule activity."

What would this look like in MS Project?

In this example, we will establish a contingency reserve for the entire project.  Note that this could also be performed at the work package level.

1.  You must have already completed the steps of Activity Definition, Activity Sequencing, Activity Resource Estimating, Activity Duration Estimating (which includes effort estimating for the individual tasks) and loaded all this information into MS Project.  You would have a schedule that looks something like this:

2.  Insert the Cost field

3. Insert the Contingency Reserve activity.  Make the duration of this activity .5 days less than the overall duration of the project (making it equal to the duration of the project will not allow MS Project to calculate the true critical path tasks within your schedule)

4.  Input the Contingency Reserve amount in the cost field.  Note that a detailed risk analysis would be preferred to help establish the true cost contingency reserve needed. But for our example we are going to assume the organization mandates a 10% Contingency Reserve be established for all projects.

  Note: Making the Contingency Reserve duration nearly equal the Duration of the project spreads the reserve amount out over the life of the project

5.  The schedule can now be baselined.

Managing Costs

6.  So now reality sets in.  We find it cost $1,000 more to perform a series of tasks than we had anticipated.  By inserting our Baseline Cost and Cost Variance fields we can easily see this variance.

7.  All we have to do to get the project back on budget is to deduct $1,000 from our Contingency Reserve cost amount.