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Cost Modelling: Another
Dimension in Project
Planning and Control
Dr Paul Wood
BMT Group
•  An international network of subsidiaries providing
engineering, design and risk management consultancy
•  Who...
BMT Hi-Q Sigma Overview
•  A professional services company compromising of 90 consultants across offices in
Bath, Basingst...
BMT Hi Q Sigma Services and Capabilities
•  We help to deliver complex programmes
through the integration of programme
man...
Aim
1.  Identify the touch points between Cost
Estimating, Scheduling and Project
Controls.
2.  Understand the mutual bene...
Agenda
1. Cost Model Process/Techniques
2. Learning Cycle
3. Project Life Cycle
4. Touch Points between the processes
5. C...
Cost Model Process
•  Agree Assumptions with customer
•  Identify Data Sources (with customer)
•  Data Collection (includi...
Cost Model Techniques
•  Top Down
•  Historical Trend Analysis
0
20
40
60
80
100
120
140
160
180
200
1890
1895
1900
1905
1...
Cost Model Techniques
•  Top Down
•  Historical Trend Analysis
•  Analogy (“It is like one of these”)
•  Parametric (Patte...
Learning Cycle
Planning
Doing
Reviewing
Learning
From
Experience
(LFE)
Vision
Project/Product Life Cycle
Concept
Definition
Implementation
Handover
Operations
Disposal/
Termination
Time (not to scale)...
Project Life Cycle
Concept
Definition
Implementation
Handover
Operations
Disposal/
Termination
Time (not to scale)
Culture...
Project Activities
Concept Definition Implementation Handover
Time (not to scale)
Culture
Business
Case
Project
Plan
Visio...
Learning Cycle (Reality)
Planning1
Doing
Reviewing
LFE
Vision1
Planning2
Vision2
Touchpoints
Project Phase Cost Schedule PMB
Concept Manhours are estimated Solution is unknown, high level
schedules (date...
6. Common Problems (costs)
•  Collection of good data
•  Estimates based on estimates and not always documented
(increases...
Benefits of working together
•  Better understanding of common stakeholders
•  Build on culture change as the project prog...
Thank you
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Cost Modelling: Another Dimension in Project Planning and Control - Dr Paul Wood

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In this presentation from #eva17 Dr Paul Wood discusses Cost Modelling. He discusses the touch points between cost estimating, scheduling and project controls and the mutual benefits of interfacing the processes. This, in turn, helps the audience to understand the long term benefits that can flow between similar projects.

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Cost Modelling: Another Dimension in Project Planning and Control - Dr Paul Wood

  1. 1. Cost Modelling: Another Dimension in Project Planning and Control Dr Paul Wood
  2. 2. BMT Group •  An international network of subsidiaries providing engineering, design and risk management consultancy •  Wholly independent partner providing customers with access to expertise around the globe •  Heritage of research and technology which drives significant ongoing investment in R&D and development of future talent •  Formed in 1985 through Government privatisation of maritime research and technology organisations •  Held in beneficial ownership for the staff •  2011 turnover £140 million •  1300 staff in 22 subsidiary companies (60 Offices) in 23 countries in Europe, North America and Asia
  3. 3. BMT Hi-Q Sigma Overview •  A professional services company compromising of 90 consultants across offices in Bath, Basingstoke and London. •  Operating across the Defence, Energy and Transportation sectors. •  Achieved a turnover in 2011 of ~ £12M. •  As an employee benefit trust with no manufacturing or supply chain interests, we provide truly impartial advice, assistance. •  In the complex world which we know you face every day, our goal is simple and steadfast: to bring clarity
  4. 4. BMT Hi Q Sigma Services and Capabilities •  We help to deliver complex programmes through the integration of programme management and systems engineering. We help you achieve clarity through: •  Strategic guidance to organisations in the establishment and management of programmes •  Interventions to optimise existing programmes/projects •  Provision of quality people as interim support Risk and Opportunity Management Investment Appraisal Project Controls and EVM Enterprise Architecture Requirements Definition Training and Mentoring Business Planning and Forecasting Business Process Management Portfolio Management Planning and Schedule Management Feasibility Studies and Due Diligence Project Diagnostics Strategic Guidance Project Optimisation Interim Support Enabling Successful Programmes
  5. 5. Aim 1.  Identify the touch points between Cost Estimating, Scheduling and Project Controls. 2.  Understand the mutual benefits of interfacing the processes. 3.  Understand the long term benefits that can flow between similar projects.
  6. 6. Agenda 1. Cost Model Process/Techniques 2. Learning Cycle 3. Project Life Cycle 4. Touch Points between the processes 5. Common problems in Cost Modelling 6. Benefits of working together 7. Questions
  7. 7. Cost Model Process •  Agree Assumptions with customer •  Identify Data Sources (with customer) •  Data Collection (including risks) •  Model Development •  Model Verification & Validation •  Analysis •  Report Project boundaries Same sources? Shared meetings? Check schedule Schedule Analysis Shared report?
  8. 8. Cost Model Techniques •  Top Down •  Historical Trend Analysis 0 20 40 60 80 100 120 140 160 180 200 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 Cost (£M) Cost (£M) Linear (Cost (£M))
  9. 9. Cost Model Techniques •  Top Down •  Historical Trend Analysis •  Analogy (“It is like one of these”) •  Parametric (Pattern backed up by statistics) •  Bottom Up •  Cost and Resource Breakdown Structure (CRBS) •  Weight Groups – NES 163, Brown Book and ANEP 42 •  Expert Opinion •  Extrapolation (closer to Parametric (at the system level))
  10. 10. Learning Cycle Planning Doing Reviewing Learning From Experience (LFE) Vision
  11. 11. Project/Product Life Cycle Concept Definition Implementation Handover Operations Disposal/ Termination Time (not to scale) Culture Business Case Project Plan PPE/LFE
  12. 12. Project Life Cycle Concept Definition Implementation Handover Operations Disposal/ Termination Time (not to scale) Culture Business Case Project Plan PPE/LFE Project Close Out X X X
  13. 13. Project Activities Concept Definition Implementation Handover Time (not to scale) Culture Business Case Project Plan Vision Planning Doing Reviewing Learning From Experience Top Down Bottom Up Actual Costs are Evolving Cost Estimates Cost Knowledge Cost Process Scheduling/PMB Process Develop Schedule Deliver against the PMB Agree the PMB Project Close Out Learning Cycle
  14. 14. Learning Cycle (Reality) Planning1 Doing Reviewing LFE Vision1 Planning2 Vision2
  15. 15. Touchpoints Project Phase Cost Schedule PMB Concept Manhours are estimated Solution is unknown, high level schedules (dates of phases) Not yet agreed for whole project Definition More robust manhours available to aid schedule; Risk info available Schedule can be built using estimated manhours from cost model PMB agreed; Risk info included Implementation Feedback on actual manhours and material costs from Project Controls Controlled as PMB Project delivered against PMB; Known costs and manhours fed back to cost modellers Handover Milestone activity Controlled as PMB Milestone activity LFE Learns from the PMB Learns from the Manhour cost model data and PMB data Confidence is given from the learning from previous projects Culture Culture is changed from LFE Data providers have the same culture that has been cultivated during the cost model data collection The culture change engendered as the cost model and schedule has developed.
  16. 16. 6. Common Problems (costs) •  Collection of good data •  Estimates based on estimates and not always documented (increases errors) •  Risks are bolted on at the end of the process •  Schedule is determined later •  Lack of understanding of three point estimates and statistical analysis •  Costs in wrong year creates inflation errors (a better understanding of the schedule would help!)
  17. 17. Benefits of working together •  Better understanding of common stakeholders •  Build on culture change as the project progresses •  Reduces stakeholder engagement time •  Improved communication •  Costs developed using manhours can be used to develop schedules (vice versa in the next project) •  Reduces the overhead of project planning (robust data available) •  Feedback loops can be used to make the cost model, schedule and PMB more robust on follow on projects •  Helps build a robust database of project data
  18. 18. Thank you

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