project management and description of cost management

1. COST ANALYSIS OF PROJECT
BY VARSHA V. AWASARKAR

2. OBJECTIVE
1. To know the meaning of cost & study its types.
2. To know the meaning of project management.
3. To focus on cost analysis & to emphasize on general cost analysis
procedures.
4. To study the analysis of cost incurred on
 Procedures(operation cost analysis)
 Clinical trails
 Instrumentations
 Raw materials
( with examples).
5. To emphasize on Advantages of Project Cost Management.

3. WHAT IS COST???
• In production, research, retail, and accounting, a cost is the
value of money that has been used up to produce something, and
hence is not available for use anymore.
• In business, the cost may be one of acquisition, in which case the
amount of money expended to acquire it is counted as cost. In this
case, money is the input that is gone in order to acquire the thing.
• This acquisition cost may be the sum of the cost of production as
incurred by the original producer, and further costs of transaction
as incurred by the acquirer over and above the price paid to the
producer.
• Usually, the price also includes a mark-up for profit over the cost
of production.

4. Cost estimation
• When developing a business plan for a new or existing
company, product, or project, planners typically make
cost estimates in order to assess whether
revenues/benefits will cover costs (cost-benefit
analysis). This is done in both business and
government.
Costs are often underestimated, resulting in cost
overrun during execution.

5. TYPES OF COST
F
Direct materials Manufacturing
cost overhead cost
MANUFACTURING
COST
Direct labor cost

6. NON
MANUFACTURING
COST
ADMINISTRATIVE COST
SELLING AND DISTRIBUTION
COST

7. OTHER TYPES

8. Project management
• Project management is the discipline of planning,
organizing, motivating, and controlling resources to achieve
specific goals.
• A project is a temporary endeavor(attempt by employing
effort) designed to produce a unique product, service or
result with a defined beginning and end (usually time-
constrained, and often constrained by funding or
deliverables), undertaken to meet unique goals and
objectives, to bring about beneficial change or added value.
• The temporary nature of projects stands in contrast with
business as usual(or operations) which are repetitive,
permanent, or semi-permanent functional activities to
produce products or services.

9. • The primary challenge of project
management is to achieve all of the project
goals.
• The primary constraints are scope, time,
quality and budget.
• The secondary challenge is to optimize the
allocation of necessary inputs and
integrate them to meet pre-defined
objectives.

10. Fig. Project Management Stages

11. Project Cost
Management Strategies

12. Officers involved in project
cost management
• Cost Manager-Cost Analysis, VAT Assessment
• Project Manager-Life Cycle Analysis, Operation and
Maintenance of documentation and the operating business
plan for any new facility

13. COST ANALYSIS
DEFINITION : Cost analysis is the:
o Review and evaluation of the separate cost elements
and profit/fee in an offeror's or contractor's proposal
(including cost or pricing data or information other than
cost or pricing data), and
o Application of judgment
 Used to determine how well the proposed costs
represent what the cost of the contract should be,
assuming reasonable economy and efficiency.

14. General Cost Analysis
Techniques and Procedures
Use the following techniques and procedures to perform cost analysis:
• Verify cost or pricing data or information other than cost or pricing
data.
• Evaluate cost elements, including:
o The necessity for and reasonableness of proposed costs,
including allowances for contingencies;
o Projections of the offeror's cost trends, on the basis of current
and historical cost or pricing data or information other than cost
or pricing data;
o A technical appraisal of the estimated labor, material, tooling, and
facilities requirements, and scrap and spoilage factors; and
o The application of audited or negotiated indirect cost rates, labor
rates, cost of money factors, and other factors.

15. CONT…..
• Evaluate the effect of the offeror's current practices on future costs.
o Ensure that the effects of inefficient or uneconomical past practices are not
projected into the future.
o In pricing production of recently developed complex equipment, perform a
trend analysis of basic labor and materials even in periods of relative price
stability.
• Compare costs proposed by the offeror for individual cost elements with:
o Actual costs previously incurred by the offeror;
o Previous cost estimates from the offeror or from other offerors for the
same or similar items;
o Other cost estimates received in response to the Government's request;
o Forecasts or planned expenditures.

16. COST INCURRED ON
PROCEDURES
• A process is one part of a complete set of activities that
an item must pass through during manufacture.
• It is also called as Process Cost Systems; Under a process
cost system, direct costs are charged to a process even
though end-items (which may not be identical) for more than
one contract are being run through the process at the same
time. At the end of the accounting period, the costs incurred
for that process are assigned to the units completed during
the period and to the incomplete units still in process.
1. The completed item results from a series of processes,
each of which produces some changes in the item.
2. The number of processes involved will vary with the
complexity of the item.

17. 3. The greater the similarity between two end-items, the more likely
they are to go through the same process, during the same period of
time, with factory laborers devoting a part of their time to each item.
• If all items being processed are identical, the contractor may add
the costs incurred during the accounting period to the cost of the
beginning work-in-process inventory and subtract the estimated cost
of the ending work-in-process inventory to arrive at the total costs of
items completed.
Unit cost = total cost
number of units completed

18. E.g. Annual Operating Cost
Summary Table of Superpro

19. COST INCURRED ON
CLINICAL TRAILS
• Clinical trials are sets of tests in medical research and
drug development that generate safety and efficacy data
(or more specifically, information about adverse drug
reactions and adverse effects of other treatments) for
health interventions (e.g., drugs, diagnostics, devices,
therapy protocols).
• They are conducted only after satisfactory information has
been gathered on the quality of the nonclinical safety, and
health authority/ethics committee approval is granted in
the country where approval of the drug or device is sought.

20. CONT……
• A full series of trials may incur sizable costs, and the
burden of paying for all the necessary people and
services is usually borne by the sponsor, which may be a
governmental organization or a pharmaceutical,
biotechnology or medical device company.
• When the diversity of required support roles exceeds the
resources of the sponsor, a clinical trial is managed by an
outsourced partner, such as a contract research
organization or a clinical trials unit in the academic sector.

21. PHASES
Phase 3
Phase 4

22. COST OF CLINICAL
TRAILS

23. CONT…..
Sponsor
 The cost of a study depends on many factors, especially the
number of sites conducting the study, the number of patients
required, and whether the study treatment is already approved for
medical use.
 Clinical trials follow a standardized process.
• The costs to a pharmaceutical company of administering a Phase 3
or 4 clinical trial may include, among others:
• manufacturing the drug(s)/device(s) tested
• staff salaries for the designers and administrators of the trial
• payments to the contract research organization, the site
management organization (if used) and any outside consultants

24. CONT……
• payments to local researchers (and their staffs) for their time and
effort in recruiting patients and collecting data for the sponsor
• study materials and shipping
• communication with the local researchers, including on-site
monitoring by the CRO before and (in some cases) multiple times
during the study
• one or more investigator training meetings
• costs incurred by the local researchers, such as pharmacy fees, IRB
fees and postage
• any payments to patients enrolled in the trial (all payments are
strictly overseen by the IRBs to ensure the patients do not feel
coerced to take part in the trial by overly attractive payments)
• These costs are incurred over several years.

25. CONT…..
• In the US, sponsors may receive a 50% tax credit for
certain clinical trials,
• The enormous cost and risk of Phase III trials create
incentives for researchers and investors to avoid work on
medications for the chronic conditions and illnesses that
pose the greatest threat to Americans, in terms of health
spending and in terms of the number of people affected.
This avoidance, in turn, harms overall U.S. health
outcomes and drives up the cost of health care.
.

26. CONT……..
Investigators
• National health agencies, such as the US National Institutes of
Health, offer grants to investigators who design clinical trials that
attempt to answer research questions of interest to the agency.
• Many clinical trials do not involve any money. However, when the
sponsor is a private company or a national health agency,
investigators are almost always paid to participate.
• These amounts can be small, just covering a partial salary for
research assistants and the cost of any supplies (usually the case
with national health agency studies), or be substantial and include
'overhead' that allows the investigator to pay the research staff
during times between clinical trials.

27. CONT……
Subjects
• Participants in Phase 1 drug trials do not gain any direct benefit from
taking part.
• They are generally paid an inconvenience allowance because they
give up their time (sometimes away from their homes); the amounts
paid are regulated and are not related to the level of risk involved.
• In most other trials, subjects are not paid to ensure their motivation
for participating is the hope of getting better or contributing to medical
knowledge, without their judgment being skewed by financial
considerations. However, they are often given small payments for
study-related expenses such as travel or as compensation for their
time in providing follow-up information about their health after they are
discharged from medical care.

28. CONT….
Participation as labour
• It has been suggested that clinical trial participants be considered to
be performing ‘experimental' or 'clinical labour’.

29. COST INCURRED IN
INSTRUMENTATION
SuperPro and EnviroPro Designer perform thorough Cost Analysis and
Project Economic Evaluation
EXAMPLE : Equipment Purchase Cost Table
SuperPro is equipped with built-in functions that estimate
equipment purchase cost based on size, material of
construction, and other characteristics. The user has the
option to specify his/her own equipment purchase cost or
provide his/her own parameters (in power-law format) for
estimating the cost. Starting with version 5.0, the user
may create an equipment database (in MS Access
format) and store equipment-related info (including cost
data) in a centralized and easily retrievable way.

31. COST INCURRED ON
RAW MATERIALS
EXAMPLE : Raw Materials Cost Table
• The amount of raw materials is calculated based on the
material balances. The unit cost is retrieved from the
component database. The user has the option to nullify
the unit cost (purchasing price) in the component
database.

33. Profitability Analysis Table

34. Cont…
The profitability analysis table includes info on capital
investment, annual production, unit production cost,
revenues, profit, gross margin, return on investment and
payback time.

35. The Advantages of
Project Cost
Management
• Stress Reduction
When you manage money well, you can worry less about how you are going to
pay your expenses. Cost management thus both have the potential to reduce
your stress level.
• Pursuing Other Objectives
Effective cost management Cost management, thus, is a tool for pursuing
other objectives and goals.
• Prioritization and Efficiency
Often, when you engage cost management, it is not possible to do everything
initially proposed. Subsequently, you learn to prioritize and decide which
projects deserve your funds and attention. If you want to do more with your
money , then you need to find ways to be more efficient.

36. ADV
• Sense of Accomplishment
People often feel a sense of pride or accomplishment when they are able to do
everything they set out to do. They also can feel proud when their cost
management allows their company to take on additional projects, keep on
employees, offer benefits and, in the fullest sense, keep the company in
business.
• Awareness and Planning
In order to manage costs effectively, you must gather and analyze data. Doing
this makes you continuously aware of what is going on in the marketplace and
within your specific company. It lets you plan and make well-informed
decisions about the goals you set and how you achieve them.

37. ADV
• Accountability
When you try to manage costs, you typically assign people to specific tasks
and place deadlines on those duties. If the people assigned do not fulfill their
obligations, you can hold them accountable and determine what disciplinary
action, if any, is warranted Cost management also can find people
accountable in instances of fraud.
• Expectations
When you manage anything, you set a standard by which to measure success.
For example, when you are managing time, success can be completing
reports within the week. When expectations are clear, employees have an
easier time doing their jobs and have a better understanding of the
ramifications of not meeting those expectations.

38. Conclusion
From this study we can conclude that the
project cost management is a very
essential tool in the research and day to
day laboratory practices.

39. REFERENCES
1. Cost-Wikipedia, the free Encyclopedia
2. Project management-Wikipedia, the free
Encyclopedia
3. Clinical trails-Wikipedia, the free Encyclopedia
4. Final project cost management, by W. C.
Neurnst.
5. Project cost management strategies, Vilanova
university, USA, ONLINE.