Smsvn pmp training_slides_chapter_7

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Smsvn pmp training_slides_chapter_7

  1. 1. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 PROJECT COST MANAGEMENT  Make sure the project can be completed within the approved budget.  There are 4 processes  Plan Cost Management  Estimate Cost  Determine Budget  Control Cost  Notes:  Different stakeholders -> different ways to manage cost  primarily concerned with the cost of the resources needed to complete project activities 1
  2. 2. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 7.1 PLAN COST MANAGEMENT is the process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs. 2 Inputs Tool&Techniques Outputs .Project management plan .Project charter .EEF .OPA .Expert Judment .Analytical techniques .Meetings .Cost management plan
  3. 3. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 7.2 ESTIMATE COST Is the process of developing approximation of the monetary resources needed to complete project activities 3 Inputs Tool&Techniques Outputs .Cost management plan .Human resource management plan .Scope baseline .Project schedule .Risk register .Enterprise environmental factors .Organizational process assets .Expert judgment .Analogous estimating .Parametric estimating .Bottom-up estimating .Three-point estimating .Reserve analysis .Cost of quality .Project management software .Vendor bid analysis .Group decision-making techniques .Activity cost estimates .Basis of estimates .Project documents updates
  4. 4. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 TYPE OF COSTS  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  Not directly indentifiable, related to project product  e.g. taxes, fringe benefit  Sunk Costs:  is the cost that has already been incurred, and there is no way to recover this cost. 4
  5. 5. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 QUALITY/ACCURACY OF COST ESTIMATION 5 • Most difficult to estimate as very little project info is available, made during initiating process Estimate Accuracy Rough Order of Magnitude (ROM) +/- 50% Budget Estimate -10% +25% Definitive Estimate -5% 10% • Used to finalize the Request for Authorization (RFA), and establish commitment, made during planning phase • During the project and refined
  6. 6. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 7.3 DETERMINE BUDGET is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline 6 Inputs Tool&Techniques Outputs .Cost management plan .Scope baseline .Activity cost estimates .Basis of estimates .Project schedule .Resource calendars .Risk register .Aggreements .EEF .OPA .Cost aggregation .Reserse Analysis .Expert Judment .Historical relationships .Funding limit reconciliation .Cost baseline .Project funding requirements .Project documents updates
  7. 7. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 MANAGEMENT RESERVE, CONTIGENCY RESERVE  Contingency reserves: the cost impacts of the remaining risk  Management reserves: extra fund to cover unforeseen risk or changes to the project 7
  8. 8. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 COST BASELINE  is the approved version of the time-phased project budget, excluding any management reserves,  only be changed through formal change control procedures and  is used as a basis for comparison to actual results. 8
  9. 9. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 7.4 CONTROL COST is the process of monitoring the status of the project to update the project costs and managing changes to the cost baseline. 9 Inputs Tool&Techniques Outputs .Project management plan . Project funding requirements .Work performance data .OPA .Earned value management .Forcasting .To-complete performance index (TCPI) .Performance reviews .Project management software .Reserse Analysis .Work performance information .Cost forecast .Change requests .Project management plan updates .Project documents updates .OPA updates
  10. 10. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 EARNED VALUE MANAGEMENT  Method to measure project performance against scope, schedule and cost baseline (performance measurement baseline)  Importance measurement informations:  Cost Variance (CV)  Schedule Variance (SV)  Cost Performance Index (CPI)  Schedule Performance Index (SPI) 10
  11. 11. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 EARNED VALUE TECHNIQUE 11 Terms and Formulas Definition Earned Value (EV) As of today, what is the estimated value of the work actually accomplished? Actual Cost (AC) As of today, what is the actual cost incurred for the work accomplished? Planned Value (PV) As of today, what is the estimated value of work planned to be done? Cost Variance (CV) = EV - AC Negative is over budget Positive is under budget Schedule Variance (SV) = EV - PV Negative is behind schedule Positive is ahead schedule Cost Performance Index (CPI) = EV/AC We are getting $__ worth of work out of every $1 spent. Are funds being used efficiently? Schedule Performance Index (SPI) = EV/PV We are (only) progressing at __ percent of the rate originally planed Example $100K $200K $300K $100K – $200K = ($100K) $100K - $300K = ($200K) $100K/$200K = 0.5 i.e. 50% $100K/$300K = 0.33 i.e 33% Example: Project Budget: $400K Project Schedule: 4 months At the 3 month checkpoint: Spent: $200K Work completed: $100K Revised Total Duration Baseline Duration/Schedule Performance Index 4/0.33 = 12 months
  12. 12. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 EARNED VALUE TECHNIQUE (CON’T) 12 Terms and Formulas Definition Budget at completion (BAC) How much did we BUDGET for the TOTAL project effort? Estimate at Completion (EAC) = BAC / CPI What do we currently expect the TOTAL project cost (a forecast)? Estimate to Complete (ETC) = EAC - AC From this point on, how much MORE do we expect it to cost to finish the project (a forecast)? Variance at Completion (VAC) = BAC – EAC As of today, how much over or under budget do we expect to be at the end of the project?
  13. 13. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 EXAMPLE OF EVM 13 TIME COST Schedule Variance (SV) Cost Variance (CV) ACTUAL PLAN EARN VALUE Estimate at Completion (EAC) Budget at Completion (BAC) Projection of schedule delay at completion Projection of cost variance at completion (VAC) TODAY (Reporting day) BAC EAC AC EV PV
  14. 14. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 EXAMPLE OF EVM 14
  15. 15. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 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 EAC  TCPI 15 AC)-(EACor– AC)(BACRemainingFunds EV)–(BACRemainingWork
  16. 16. SMSVN – PMP Training Course 2013 – Chapter 7 Prepared by Nam Trung - 26/07/2013 REVIEW  Project cost management?  4 processes of time management?  Plan Cost Management  Estimate Cost  Determine Budget  Control Cost  Type of costs?  Quality/Accuracy of Cost Estimation?  Management reserve?  Contigency reserve?  Cost baseline?  CV?  SV?  CPI?  SPI?  BAC?  EAC?  ETC?  VAC?  TCPI? 16

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