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Work Breakdown Structures (WBS): the correct philosophy

Cost control phhylosophy part 2

This blog delves deeper into enhancing project performance through the adoption of the correct Cost Control Philosophy. In our previous post, we explored how typical project KPIs, such as CPI and SPI, relate to the Triple Constraint Triangle. We emphasized the importance of selecting the appropriate cost management tool to apply the correct cost control philosophy, alongside an introduction to Work Breakdown Structures (WBS).

In this blog, we explore the WBS’s role in applying the correct cost control philosophy. If you missed the first blog, you can read it here.

A well-defined Work Breakdown Structure (WBS) forms the cornerstone of every high-performing cost control department. However, confusion often arises between WBSs and other breakdown structures like Cost Breakdown Structures or Area Breakdown Structures due to terminology. This confusion leads to poorly defined WBSs, resulting in significant project consequences as it impacts the entire project execution.

What is a Work Breakdown Structure (WBS) in project management?

A Work Breakdown Structure (WBS) is a fundamental data view structure that breaks down a project into smaller, more manageable components. It is a hierarchical structure in which the total scope of work is decomposed to represent the deliverables as small engineering or work packages. Once created, the structure is agreed upon by all stakeholders and serves as the backbone for scheduling and cost management of one project or preferably multiple projects.

WBS levels

A Work Breakdown Structure (WBS) is organized into multiple levels, each providing increasing detail about the project deliverables and tasks. Project teams often consider dependencies between tasks at each level to ensure a logical flow of work. Here’s a brief overview of the typical WBS levels:

Level 1: Project goal

  • The top level of the WBS represents the overall project goal or final deliverable. This is the broadest level and provides a high-level view of what the project aims to achieve.

Level 2: Major deliverables or phases

  • This level breaks down the project goal into major deliverables or phases. Each major component represents a significant part of the project, such as project phases, milestones, or major deliverables.

Level 3: Sub-deliverables

  • In level 3, the team further breaks down major deliverables into sub-deliverables to provide more detail. These are smaller components that contribute to the completion of each major deliverable.

Level 4 and below: Engineering/Work packages

  • At the lower levels, the project team decomposes sub-deliverables into work packages. These are the smallest units of work in the WBS, detailed enough to be assigned to discipline experts, project stakeholders or contractors. These components contain specific tasks that need to be completed to achieve the higher-level deliverables.

As project teams develop work breakdown structure levels, they further clarify the required work to achieve the project objective. Project managers can incorporate additional levels into the WBS, depending on the desired level of detail/span of control. This flexibility allows for a tailored visualization of the project structure, aiding in thorough planning and execution.

Work Breakdown Structure (WBS) example

 

Work Breakdown Structure - visual

Work Breakdown Structure: The backbone of scheduling and cost control

Advantages of using Work Breakdown Structures

The advantages of a strong WBS become obvious when it is combined with other breakdown structures, like the Organizational Breakdown Structure (OBS). Together they allow for assigning the work-packages / deliverables to the responsible body via a Responsibility Assignment Matrix (RAM). RAM has shown to be an important tool as it helps increase project communications and track work progress (Earned Value Management). Both communication and EVM have proven to be strong influencers of KPIs like the CPI and SPI.

Additionally, a work breakdown structure may serve as an overview of the required resources per discipline or work-package, which is extremely useful in providing insight on resource requirements. Through high end resource allocation, it is possible to reduce resource waste and improve project efficiency.

How to create a WBS?

To make a high-quality Work Breakdown Structure (WBS), it helps to follow a consistent work procedure. Doing so helps greatly with recognizing mistakes and justifying specific choices made. An approach to define a WBS could be as follows:

  1. Decompose project scope (or portfolio scope) of work into deliverables
  2. Specify the desired hierarchy (process, organization or product)
  3. Represent the entire project by a specific “project block”
  4. Specify the appropriate level of detail the WBS should contain
  5. Branch out beneath the project block into several levels and components which are equal to the total project scope when combined
  6. Review and refine

Using appropriate coding and labeling for the Work Breakdown Structure in project management is crucial. This ensures that others understand how to utilize the breakdown structure and which activities to expect upon project completion. Furthermore, it also specifies where to allocate resources during scheduling. A cost control software may simplify this process by automating the assignment of cost accounts to breakdown structures.

In short

Executing a project effectively relies on establishing a robust foundation for cost control through a work breakdown structure (WBS). When the WBS defines work-package units using a consistent creation approach, it becomes the backbone of scheduling and cost management. By anticipating the remaining work and applying the appropriate cost control philosophy, project managers can minimize resource waste and optimize efficiency for future projects.

If you’d like to talk to an expert about Project Cost Management services and tools, please contact us.

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