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Project                       Cost                    ManagementPrepared by: Mohamed Dahi        2013
Project Cost Management                                       ProcessKnowledge  Area                                      ...
Financial Statement                           Income statement P/L                                      Balance Sheet    ...
The project cost management process includeCost estimatingCost budgetingCost controlling
Project Cost Management•   T process involved in estimating, budgeting, and controlling cost so     he    that the project...
Resource      Determining what resources andplanning      quantities of them should be used.   Cost       Developing an es...
The main outputs of the cost estimating process are: Cost estimates Supporting detail Cost management plan
Cost Management Plan Describes how cost variances will be managed on the  project.Content: Level of accuracy Reporting ...
Cost Estimating 7.1 The process of developing approximation of the monetary  resources needed to complete project activit...
1.The proposal estimate is prepared before proposal andinitiation to commit resources to the first stage of theproject.‫(-...
:Estimating methods used to prepare types of estimateType of Estimate    (%)AccuracyProposal estimate     + - 50Budget est...
Definitive   approximateEstimate
Types of Cost Variable Costs    Change with the amount of production/     work    e.g. material, supplies, wages Fixed...
Tools &Inputs              Techniques           Outputs1. Scope baseline   1. Expert judgment   1. Activity cost2. Project...
Cost Estimating Tools• Analogous estimates -unit method  Using the actual cost of a previous, similar project  Used when t...
One point estimating Approximation of a single quantity or a single numerical value, instead of  that of a whole range of ...
Ranges Of EstimatesRough Order of Magnitude.  An approximation, made with a degree of knowledge and confidencethat the est...
Quality/Accuracy of Cost EstimationEstimate Accuracy                                          WBS level 1                 ...
Cost Budgeting 7.2Process of aggregating the estimated cost of individual activities or work packages to establish an aut...
Inputs                   Tools &              Outputs1.Activity cost    Techniques  estimates                             ...
Cost Aggregation Reserves & risk management                               Cost Budget  are important while estimating!   ...
$1.423    Cost Budget                                               Example   $68     Management reserves $1.355     Cost ...
Funding RequirementsCumulative values                                                                  Is the time        ...
Control Cost 7.3The process of monitoring the status of the project toupdate the project budget and managing changes tothe...
‫الدهداف من مراقبة التكاليف بالنسبة للمالك والمقاول‬                                                                      ...
Inputs            Tools &           Outputs                   Techniques                                    1.Work1.Projec...
?How to control cost Follow the cost management plan Look at any organizational process asset that are  available  Manag...
Progress Report:   A method to control schedule and cost Progress/performance report (output from communication area) Wh...
Earned Value TechniqueMethod to measure projectperformance against scope,schedule and cost baseline(performance measuremen...
BCWP      BCWS                                ACWP        PV                                  AC                          ...
How EV Works? The value the contractor is entitled to receive from  the owner based on estimated prices and actual  amoun...
 Planned value (PV) Is the cost of work thats been budgeted for  a schedule activity or W S component to be completed   ...
Earned Value Management Interpretation of basic EVM performance measures               CV = EV - AC                      ...
ExerciseYou have a project to build a box. The box is six sided. Each side is to take one day tobuild and is budgeted for ...
Task     Progress   Cost spentSide 1     100%       $1,200Side 2     100%       $1,000Side 3     75%         $750Side 4   ...
Exercise SolutionParameter         Calculation   Result   PV   EV   AC  BAC   CV  CPI   SV   SPI  EAC  ETC  VAC
Exercise SolutionParam                               Calculation     Result  eter PV      1000 + 1000 + 1000              ...
ON SCH DUL                           E   E                      ON BUDGET3450                                             ...
3450                                      PV                                          AC3025                              ...
3450                                     EV                                         PV3025                                ...
CPI= 0.88     SPI= 1.013450                                           AC                                                  ...
EAC = 6000/ 0.88 = 6818.18          Estimate at completionETC = 6818.18 – 3425(AC) = 3368.18           Estimate to complet...
3450                                     PV3025                                     EV                                    ...
Late    PV               Early   EVOver    AC     Under   PV        EV             AC         AC            PVEarly       ...
EVM – Hints to remember   EV comes first in every formula   If it’s variance, the formula is EV – something   If it’s i...
‫مخطط كفاءة الجدولة والتكلفة‬                                                                                        ‫‪ ‬...
Earned Value Technique                                                                           4/0.33Revised Total Durat...
.EAC is an important forecasting value
Earned Value: Graphical Representation                               TODAY                             (Reporting         ...
EV can be calculated by        (%progress) x (planned man-days)Image captured from Practice Standard for Earned Value Mana...
over budget, getting 0.88 dollar for every dollar we spent,ahead schedule, progressing 101% of the rate planned,probably w...
Forecasting EACThere are many ways to calculate EAC, depending on the assumption made.Simple EAC calculation (EAC = BAC/CP...
(To-Complete Performance Index (TCPI Helps the team determine the efficiency that must be achieved on the remaining work f...
Forecasting EACCommon alternative way to calculate EAC Table captured from Practice Standard for Earned Value Management, ...
Questions & Answers
Next topicProject H M         .R anagement      Thank You
ادارة تكلفة المشروع
ادارة تكلفة المشروع
ادارة تكلفة المشروع
ادارة تكلفة المشروع
ادارة تكلفة المشروع
ادارة تكلفة المشروع
ادارة تكلفة المشروع
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ادارة تكلفة المشروع

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  • 03/11/13 M.DAHI
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  • Transcript of "ادارة تكلفة المشروع "

    1. 1. Project Cost ManagementPrepared by: Mohamed Dahi 2013
    2. 2. Project Cost Management ProcessKnowledge Area Monitoring Initiating Planning Executing Closing & Control Cost Estimating Cost Cost Cost Budgeting Control
    3. 3. Financial Statement Income statement P/L  Balance Sheet  Economic Analysis Benefit-cost ratio- Higher BCR, more preferable Payback Period-Shorter period more preferred project Break Event Point ROI (Return on investment) IRR (internal rate of return Higher IRR, more preferable project NPV- Higher PV, more preferable project value is>=0
    4. 4. The project cost management process includeCost estimatingCost budgetingCost controlling
    5. 5. Project Cost Management• T process involved in estimating, budgeting, and controlling cost so he that the project can be completed within approved budget• L cycle costing ife Looking at the cost of whole life of the product (include maintenance)• Value analysis (value engineering) Looking at less costly way to do the same work within the same scope• L of Diminishing Returns aw E adding twice resource to task may not get the task done in half .g. cost/ time
    6. 6. Resource Determining what resources andplanning quantities of them should be used. Cost Developing an estimate of the costs andestimating resources needed to complete a project. Cost Allocating the overall cost estimate tobudgeting individual work items to establish a baseline for measuring performance. Cost Controlling changes to the projectcontrolling budget.
    7. 7. The main outputs of the cost estimating process are: Cost estimates Supporting detail Cost management plan
    8. 8. Cost Management Plan Describes how cost variances will be managed on the project.Content: Level of accuracy Reporting format Rules for measuring cost performance Cost baseline Control thresholds Cost change control procedures
    9. 9. Cost Estimating 7.1 The process of developing approximation of the monetary resources needed to complete project activities Points for estimating (WBS-person doing work -historical information- No Padding –Realistic)What do you need before estimating costs o Cost trade-offs ‫ ))المقايضة‬risk must be considered  How is estimating done? .Feedback to tender depart
    10. 10. 1.The proposal estimate is prepared before proposal andinitiation to commit resources to the first stage of theproject.‫(-تقدير مرافق لدراسة الجدوى‬order of magnitude –madewithout any detailed eng-data).‫()مقترح‬ROM)2. The budget estimate is prepared during proposal andearly planning , and commit resources to design andappraisal.‫-تقدير من اجل تقييم البدائل التصميمية‬3. The sanction estimate is prepared during design andappraisal to gain funding for the project, or approval fromthe project sponsor.‫تقديرات اولية- الجازة‬4. The control estimate is prepared during implementationplanning.‫تقديرات تفصيلية‬5. A tender estimate is prepared as part of the process ofbidding for a contract.‫سعر العطاء‬
    11. 11. :Estimating methods used to prepare types of estimateType of Estimate (%)AccuracyProposal estimate + - 50Budget estimate 20 - +Sanction estimate + - 10Control estimate +-5Tender estimate +-2
    12. 12. Definitive approximateEstimate
    13. 13. Types of Cost Variable Costs  Change with the amount of production/ work  e.g. material, supplies, wages Fixed Costs  Do not change as production change  e.g. set-up, rental Direct Costs  Directly attributable to the work of project  e.g. team travel, recognition, team wages Indirect Costs  overhead or cost incurred for benefit of more than one project  e.g. taxes, fringe benefit, janitorial services  Cost reserves: amount of money needed above the estimate to reduce risk of overruns of project objectives to a level acceptable to the organization
    14. 14. Tools &Inputs Techniques Outputs1. Scope baseline 1. Expert judgment 1. Activity cost2. Project 2. Analogous estimates schedule estimating 2. Basis of3. Human resource 3. Parametric estimates plan estimating 3. Project4. Risk register 4. Bottom-up document5. Enterprise estimating updates environmental 5. Three-point factors estimates6. Organizational 6. Reserve process assets analysis 7. Cost of quality 8. Project management estimating software 9. Vendor bid analysis
    15. 15. Cost Estimating Tools• Analogous estimates -unit method Using the actual cost of a previous, similar project Used when there is limited information Form of expert judgment- used in the early project stages• B ottom up estimating Estimating the cost of individual work items ,then rolling up to get total project cost• P arametric modeling-(statistical ) Using project characteristics in a mathematical model-may be simple with very few parameters e.g. (construction per squire foot calculation) -• T hree P oint Estimating
    16. 16. One point estimating Approximation of a single quantity or a single numerical value, instead of that of a whole range of quantities or values.Analog costingComputing cost of an item on the basis of the cost of a similar (analogous) item and using adjustment factors to account for differences between the two items.Parametric cost estimatingMethodology that employs one or more cost estimating relationships for quantifying research and development (R& costs. D)
    17. 17. Ranges Of EstimatesRough Order of Magnitude.  An approximation, made with a degree of knowledge and confidencethat the estimated figure falls within a reasonable range of values-Budget EstimateApproximation of the cost of an activity, job, program or project, preparedfor budgeting and planning purposes only. Not accurate enough to providea basis for a firm commitment, it represents only the budget makersunderstanding of the scope and expense of what needs to be done.Definitive Estimate
    18. 18. Quality/Accuracy of Cost EstimationEstimate Accuracy WBS level 1 Ball Park Rough • M difficult to estimate as very little project ost Order of info is available, made during initiatingMagnitude 50% -/+ process- parametric method (ROM) WBS level 2,3 • Used to finalize the Request for Budget 10%- Authorization (RF A), and establish commitment, made during early planningEstimate 25%+ phase- analogy methodDefinitive 5%- • During the project and refined • late planning & execution-Estimate 10%+ • grassroots method WBS level 4,5,6
    19. 19. Cost Budgeting 7.2Process of aggregating the estimated cost of individual activities or work packages to establish an authorized cost baseline.Allocating the overall cost estimate to individual activates or work packages, in order to establish a cost baseline for measuring project performance.
    20. 20. Inputs Tools & Outputs1.Activity cost Techniques estimates 1.Cost2.Basis of 1.Cost aggregation performance estimates 2.Reserve analysis baseline3.Scope 3.Expert judgment 2.Project baselines funding 4.Historical requirements4.Project relationship schedule 3.Project 5.Funding limit document5.Resource reconciliation updates calendars6.Contracts7.Organizational process assets
    21. 21. Cost Aggregation Reserves & risk management Cost Budget are important while estimating! Management reserves  Contingency reserves:  Cost Cost baseline Baseline Contingency reserves the cost impacts of the remaining risk Project estimates Control account estimates  Management reserves:  Cost Work package estimates Budget Activity estimates extra fund to cover unforeseen risk or changes to the project
    22. 22. $1.423 Cost Budget Example $68 Management reserves $1.355 Cost baseline $105 Contingency reserves $1.250 Project estimatesCA1$850 CA2$480 Control account estimatesWP 1$100 WP2$250 WP3$500 WP4$175 Work package estimatesA 1$25 A2$25 A 3$25 A 4$25 A 5$45 Activity estimates
    23. 23. Funding RequirementsCumulative values Is the time phased budget that is used as the basis Cost Baseline against whish the progress is measured Expenditures Time
    24. 24. Control Cost 7.3The process of monitoring the status of the project toupdate the project budget and managing changes tothe cost baseline
    25. 25. ‫الدهداف من مراقبة التكاليف بالنسبة للمالك والمقاول‬ ‫بالنسبة للمالك‬ ‫استل م المشروع فى الميعاد المحدد له حتى تتحقق له اعادة دورة راس المال‬ ‫فى حالة عقود تعويض التكاليف ‪ cost reimbursement‬تكون مسئولية‬ ‫المالك هى مراقبة التكالف لهنه سيكون مسئوال عن شراء جميع المواد‬ ‫بالنسبة للمقاول‬ ‫التأكد من تنفيذ وتسليم المشروع فى الميعاد المحدد‬ ‫التاكد من التكاليف الفعلية تسير كما هو مخطط‬ ‫فى حالة العقود محددة السعار مقدما ‪ price given in advance‬يقو م المقاول‬ ‫بأخذ المشروع بسعر معين لذلك فهو المسئول عن شراء جميع المواد وبذلك تكون مسئوليته‬ ‫الساسية حتى ل يقل هامش الربح المخطط‬ ‫العاومل التى تؤثر على اختيار فترات المتابعة‬‫تعقد وتكثف اهنشطة المشروع يؤدى الى تكثيف وتقليل فترات المتابعة وخاصة اثناء التشطيبات‬‫تعتمد فترات المتابعة اساسا على مدة المشروع فكلما زاد زمن المشروع زادت فترات المتابعة‬ ‫درجة الدقة فى التنفيذ تزداد كلما زادت المتابعة على المشروع‬
    26. 26. Inputs Tools & Outputs Techniques 1.Work1.Project 1.Earned value performance management management measurement plan 2.Forecasting 2.Budget forecast2.Project funding 3.To-complete 3.Organizational performance process requirement index updates3.Work performance 4.Performance 4.Change reviews requests information4.Organizational 5.Variance 5.Project analysis management process assets 6.Project plan updates management 6.Project software document updates
    27. 27. ?How to control cost Follow the cost management plan Look at any organizational process asset that are available Manage change  Recording all appropriate change  Preventing incorrect change  Ensuring requested changes are agreed upon  Managing the actual changes when and as they occur Measure and measure and measure (monitoring)
    28. 28. Progress Report: A method to control schedule and cost Progress/performance report (output from communication area) Where work cannot be measured, estimate could be done by a guess- rules 50/50 Rule 20/80 Rule 0/100 Rule PCT: the amount of units completed copmared to the total amount planned Activity is considered X percent complete when it begins and get credit for the last Y percent only when it is complete
    29. 29. Earned Value TechniqueMethod to measure projectperformance against scope,schedule and cost baseline(performance measurementbaseline
    30. 30. BCWP BCWS ACWP PV AC EVIt builds on the concept of comparing banana with banananot banana with watermelon.Its enables P.M through a simple and effective analysis,to get timely updates and forecasts on project’ s time andcost performance.
    31. 31. How EV Works? The value the contractor is entitled to receive from the owner based on estimated prices and actual amount of work performed. This is way called earned value E =P * B V CT AC
    32. 32.  Planned value (PV) Is the cost of work thats been budgeted for a schedule activity or W S component to be completed B during a given time period . P is also called (B S) V CW Actual Cost (AC) Is the cost of completing the work ( a schedule activity or W S component ) in a given time period. AC is also B called (ACW P) Earned Value (EV) Is the value of the work ( a schedule activity or W S B component ) completed to date as it is compares to the budget amount assigned to the work component. E isV also called (B P) CW
    33. 33. Earned Value Management Interpretation of basic EVM performance measures CV = EV - AC SV = EV - PV The Big Picture Cost Performance Index (CPI) CP = E /AC I V  Schedule Performance Index (SP I) SP = E /P I V V Image captured from Practice Standard for Earned Value Management, PMI © 2005
    34. 34. ExerciseYou have a project to build a box. The box is six sided. Each side is to take one day tobuild and is budgeted for $1000 per side. The sides are planned to be completed one afterthe other. Today is the end of day three.Using the following project status chart, calculate PV, EV, AC, BAC, CV, CPI, SV, SPI,EAC, ETC, VAC.Describe your interpretation based on the calculation! Project is below/ over budget? Project is late/ ahead schedule? H much more money we need? ow
    35. 35. Task Progress Cost spentSide 1 100% $1,200Side 2 100% $1,000Side 3 75% $750Side 4 50% $500Side 5 0% $0Side 6 0% $0
    36. 36. Exercise SolutionParameter Calculation Result PV EV AC BAC CV CPI SV SPI EAC ETC VAC
    37. 37. Exercise SolutionParam Calculation Result eter PV 1000 + 1000 + 1000 3000 x 1000) + (100% x 1000) + 100%( EV 3025 ) (75% x 1000) + (50% x 1000 AC 500 + 750 + 1000 + 1200 3450BAC x 1000 6 6000 CV 3450 - 3025 425 - CPI 3450 / 3025 0.88 SV 3000 - 3025 25 SPI 3000 / 3025 1.01EAC 0.88 / 6000 6818.18ETC 3450 - 6818.18 3368.18 818.18-VAC 6818.18 - 6000
    38. 38. ON SCH DUL E E ON BUDGET3450 PV EV AC CPI= 1.0 SPI= 1.0 CV =EV - AC 0 SV =EV - PV 0
    39. 39. 3450 PV AC3025 CPI= 0.993000 EV SPI= 0.88 CV =EV - AC 25 - SV =EV - PV 425 -
    40. 40. 3450 EV PV3025 CPI= 1.153000 AC SPI= 1.14 CV =EV - AC 425 SV =EV - PV 400
    41. 41. CPI= 0.88 SPI= 1.013450 AC BAC 60003025 EV3000 PV CV =EV - AC 425 - SV =EV - PV 25+
    42. 42. EAC = 6000/ 0.88 = 6818.18 Estimate at completionETC = 6818.18 – 3425(AC) = 3368.18 Estimate to completeVAC = 6000 – 6818.18 = - 818.18 Variance at completion
    43. 43. 3450 PV3025 EV CPI=1.013000 AC SPI= .88 CV =EV - AC 25+ SV =EV - PV 400 -
    44. 44. Late PV Early EVOver AC Under PV EV AC AC PVEarly Late EV EVOver Under PV AC
    45. 45. EVM – Hints to remember EV comes first in every formula If it’s variance, the formula is EV – something If it’s index, EV / something If it relates to cost, use Actual Cost If it relates to schedule, use PV Negative numbers are bad, positive is good Copied from Rita’s book
    46. 46. ‫مخطط كفاءة الجدولة والتكلفة‬ ‫‪ ‬التنتاجية أفضل من المقدرة‬ ‫‪ ‬التنتاجية أسوأ من المقدرة‬ ‫‪ ‬تأخير بدء بعض المعمال‬ ‫‪ ‬ظروف معمل غير ملمئمة‬ ‫‪CPI‬‬ ‫‪ ‬اختصار بعض سامعات العمل‬ ‫‪ ‬ظروف معمل ملمئمة‬‫حالة توفير التكلفة وتأخير في العمل‬ ‫2.1‬ ‫حالة توفير التكلفة والتنفيذ المتقدم في العمل‬ ‫1.1‬ ‫1‬ ‫‪SPI‬‬ ‫8.0‬ ‫9.0‬ ‫1.1‬ ‫2.1‬ ‫9.0‬ ‫8.0‬ ‫‪ ‬وجود أعمال إضافية‬ ‫زيادة بعض السعار‬ ‫‪‬‬ ‫انتاجية أسوأ من المقدرة‬ ‫‪‬‬ ‫‪ ‬بدء بعض المعمال قبل وقتها‬ ‫‪‬‬ ‫ً‬ ‫‪ ‬مهارات العمال أفضل من المتوقع و كلفتهم ايضا‬ ‫أمعمال أصعب من المتوقع‬ ‫خطة غير جيدة‬ ‫‪‬‬ ‫حالة زيادة التكلفة والتنفيذ المتقدم في العمل‬‫حالة زيادة التكلفة وتأخير في العمل‬
    47. 47. Earned Value Technique 4/0.33Revised Total Duration Baseline Duration/Schedule Performance Index = 12 months
    48. 48. .EAC is an important forecasting value
    49. 49. Earned Value: Graphical Representation TODAY (Reporting day) Projection of schedule delay at completion Estimate at Completion EAC (EAC) Projection of cost variance at completion BAC (VAC) AC Budget at Completion (BAC) COST Cost Variance (CV) PV Schedul e ACTUAL Varianc EV e (SV) PLAN EARN VALUE TIME Project is over budget & behind schedule
    50. 50. EV can be calculated by (%progress) x (planned man-days)Image captured from Practice Standard for Earned Value Management, PMI © 2005
    51. 51. over budget, getting 0.88 dollar for every dollar we spent,ahead schedule, progressing 101% of the rate planned,probably will spend $6818 at the end (estimation),need $3368 to complete,over budget at the end for about $818 (estimation)
    52. 52. Forecasting EACThere are many ways to calculate EAC, depending on the assumption made.Simple EAC calculation (EAC = BAC/CPI) assume that the cumulative CPIadequately reflects past performance that will continue to the end of the project.(‫)يستمر‬AC+(BAC-EV) Used when current variances are thought to be atypical of the future ( ‫)لن يستمر‬
    53. 53. (To-Complete Performance Index (TCPI Helps the team determine the efficiency that must be achieved on the remaining work for a project to meet a specified endpoint, such as BAC or the team’s revised EACTCPI Work Remaining (BAC – EV) = Funds Remaining (BAC – AC)
    54. 54. Forecasting EACCommon alternative way to calculate EAC Table captured from Practice Standard for Earned Value Management, PMI © 2005
    55. 55. Questions & Answers
    56. 56. Next topicProject H M .R anagement Thank You
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