Software Project Management Spm1176


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Software Project Management Spm1176

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