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Software Project Management

Software Project Management

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  • 1. Software Project Management (SPM)
    • Lecture 7
            • Cost Management
    • Dr. Daniel Keret
  • 2. Reading Assignment 02/07/11
    • Software Project Management, Bob Hughes and Mike Cotterell, McGraw-Hill, 3rd Edition.
    • Chapter 9
    • A Guide to the Project Management Body of Knowledge, PMI Publications, 3 rd Edition, 2004
    • Chapter 7
  • 3. Cost Management
    • Cost Management includes:
      • Cost Estimation
      • Cost Budgeting
      • Cost Control
    • Estimation & Budgeting – Main Tools & Techniques
      • Estimation Techniques
      • Reserve Analysis ( Risk, Unknown, Cost of Quality)
      • Cost Baseline
      • Funding Requirements & Cash Flow
    • Cost Control.
      • Performance Measurement Analysis: Planned value, Actual Cost, Cost Variance, Cost Performance Index, Estimate to Complete
      • Approved Change Requests
  • 4. Estimating Schedule Activity
    • Estimation Cost of the Resources Needed to complete the activity
    • Includes variations to the cost estimate (Risk, Etc)
    • Take into consideration Alternative Costing for the overall project time period
      • Cost of extended design effort VS. additional maintenance costs
    • Cost estimates include ALL resources that will be charged to the project including Inflation Forecast, Salary Increase, Contingency cost.
    • ROM (Rough Order of Magnitude, E.G: – 50/+100%) is allowed in the first stages. Refinement is required at later stages ( E.G: -10/+15%).
  • 5. Activity Estimating – Inputs & Tools
    • Inputs
      • External Factors: Marketplace Condition, External Cost Information Databases
      • Organization Assets: Historical Information, Estimating Policies and Templates, Team Knowledge
      • Project Factors: Scope, WBS, Management Plan, Schedule Plan, Staffing Plan, Risk
    • Tools
      • Analogous Estimates
      • Resource Cost Rates
      • Parametric Estimates ( Function Points Etc)
      • Vendor Bid Analysis
      • Project Management Software
  • 6. Activity Estimating – Inputs & Tools (Cont.)
    • Reserve Analysis (Contingency Allowance)
      • Will Be Used at the Discretion of the Project Manager
      • Budgeting Project Unknowns
    • Risks
      • Will Be budgeted according to their severity level and probabilities
      • The budget will cover mitigation activities and workarounds and will be implemented upon the project manager decision.
    • Cost of Quality (COQ)
      • Costs added to the project in order to ensure conformance with quality standards
      • Cost of Non Quality – Failure Cost/Rework. Costs that will added as a result of bugs and non-quality project activities
  • 7. Activity Estimating - Output
    • Activity Cost Estimating – Most likely estimates of all the activity resources
    • Estimate Details
      • Basis for the estimate (how it was developed)
      • Assumptions made
      • Constraints
      • Possible range of the estimate ( 100000$ -10%/+15%)
    • Requested Changes ( If the estimate analysis recommends a change)
    • CA – Control Account (the corporate accounting number that will incur the cost of the activity)
    • Cost Management Plan (Update)
  • 8. Cost Baseline
    • Aggregating the estimated costs of the individual scheduled activities to establish a total COST BASELINE for measuring and budgeting the project
    • Inputs: WBS, Activity Cost Estimate, Project Schedule, Resource Calendar, Contracts, Cost Management Plan
    • Tools & Techniques: Cost Aggregation, Reserve Analysis, Parametric Estimating ( adjustment to the aggregate cost), Funding Limit Reconciliation (can impact the schedule and overall cost)
    • Output: Cost Baseline, Expected Cash Flow, Funding Requirements (including Management Reserve), Requested Changes, Updated Cost Management Plan
  • 9. Cost control
    • Assuring the Potential Cost Overrun do not exceed the authorized funding PERIODICALLY and in TOTAL
    • Monitoring cost PERFORMANCE to detect and understand Variances from the Baseline
    • Detect Changes as they occur
    • Prevent unapproved changes
    • Ensuring Requested Changes are Agreed Upon
    • Report Changes to Stakeholders
    • Acting to bring expected overruns within acceptable limits
    • Influencing factors that creates changes to the cost baseline
  • 10. Performance Measurements
    • Planned Value (PV) or Budget Cost of Work Schedule (BCWS) – baseline budget up to a given point in time.
    • Earned Value of an Activity
      • 0/100% technique ( The Recommended One): 0 if the activity is not fully completed. Full Actual Cost if the activity was completed.
      • 50/50% technique: 50% of the planned cost if the activity started, 100% of the actual cost if it was completed
      • Milestone Technique: Actual Cost at the milestone date.
    • Earned Value (EV) or Budget Cost of Work Performed (BCWP) – the sum of the baseline costs of the work performed up to a given point in time
    • Actual Cost (AC) or Actual Cost of Work Performed (ACWP) – up to a given point in time
  • 11. Performance Indicators
    • Cost Variance – The difference between actual and budget cost spent up to a given point in time: EV – AC.
    • Schedule Variance – The difference of the baseline budget actually spend up to a given point of time and the baseline budget that was originally planned up to the same date: EV – PV
    • CPI (Cost PerformanceOverrun Indicator): EV/AC Earned Value/Actual Cost. CPI < 1 indicates budget overrun
    • SPI (Schedule PerformanceOverrun Indicator): EV/PV Earned Value/Planned Value SPI<1 indicates schedule overrun
  • 12. Example 02/07/11
  • 13. Forecasting
    • Making Predictions or Estimates of the Project future Schedule or Cost based on the project available information at the time of the Forecasting.
    • Forecasting is USED TOGETHER with Manual Forecasting of the remaining work. (which is considered to be more accurate)
    • Definitions:
      • BAC (Budget At Completion): Cost baseline at the end of the project
      • ETC (Estimate To Complete)
      • EAC (Estimate At Completion)
      • ADE – Activity Duration Estimate
  • 14. Forecasting Techniques - Cost
    • Recalculate Cost of Future Scheduled Activities
      • Based on Typical Variance (History performance is a good prediction for the future performance) EV(NEW)=EV/CPI
      • Based On Atypical Variance ( History deviation of planned performance is irrelevant for this activity) EV(NEW)=EV
    • ECT = SIGMA(Future Activities PV(NEW)). If all the future activities are typical then ETC=(BAC-EV)/CPI
    • EAC = AC + ETC (actual cost to date + estimated cost to completion)
  • 15. Forecasting Techniques - Time
    • Recalculate Time of Future Activities
      • Based on Typical Variance (History performance of activity duration estimate is a good prediction for the future performance) ADE(NEW) = ADE/SPI
      • Based On Atypical Variance ( History deviation of planned performance is irrelevant for this activity) ADE(NEW)=ADE
    • Estimate Time To Completion will be calculated according to the project work schedule and the critical path.
    • If the variance is typical across the project we can use a rough estimate : ADE = Planned time to completion/SPI
  • 16. Example 02/07/11
  • 17. Cost Control Workflow
    • Input: Cost Baseline, Funding Requirements, Performance Information and Reports, Approved Change Requests, Project Management Plan
    • Tools & Techniques: Cost Change Control System, Performance Measurement Analysis, Forecasting, Project Performance Review/Meeting, Variance Management
    • Output: Cost Estimate Update, Cost Baseline Update, Performance Measurements, Forecasted Completion, Requested Changes, Recommended Corrective Actions, Organization Process Assets (lessons learned), Project Management Plan (update)
  • 18. Approved Change Requests
    • Changes in the Scope of the System
      • Requirements Requested By the Users and by Project Management.
      • May Change the Baseline Cost of the project as well as the Planned Completion Date.
      • Requires Stakeholders Approval
    • Changes that do not affect the project Scope
      • Usually Changed due to the project team requests
      • Changed in Design, Architecture, Delays, Etc.
      • Stakeholders will be notified if the changes are significant enough.