4. 4
Net Present Value (NPV)… “Show Me The Money”
Definition:
• Sum of the Net Cash Flow discounted to time zero using a discount rate
FV= PV/ (1+r)n
Project Selection Methods
5. 5
Project Selection Methods
Economic Models
• Payback period: the number of time periods it takes to recover your investment. It
neglects the discount rate and investment amount is not a factor. lower the better
• Benefit –Cost Ratio: Compares the benefits (revenue/payback)to the costs, Benefits
are greater than profits
6. WBS
Created by inputs
form the team and
stakeholders, top-
down effort.
A deliverable-
oriented hierarchical
decomposition of
the work.
Provides PROOF
of the need for
Staff, Cost and
time.
7. WBS
Activities and tasks
are not included in
the WBS. The 8/80 Rule says
that no work package
should be less than 8
hours or greater than
80 hours.
8. Control Account :
• A management control point where scope, cost, and schedule are integrated and
compared to the earned value for performance measurement.
• Placed at selected management points in the WBS.
• May include one or more work packages.
100% rule:
• The total of the work at the lowest levels must roll up to the higher levels so that
nothing is left out and no extra work is completed.
WBS
9.
10. Project Time Management - Scheduling
Project Time Management
includes the processes required
to ensure timely completion of
the project:
• Activity Definition -
identifying the specific
activities that must be
performed to produce the
various project deliverables
Activities represent the effort
needed to complete a work
package.
11. 01
02
03
Project Time Management - Scheduling
Project Time Management includes the processes required to ensure timely
completion of the project:
Activity
Sequencing -
identifying and
documenting
interactivity
dependencies
Used in Critical
Path Methodology
(CPM) for
constructing a
project schedule
network diagram.
05
The logical
relationships
between Activities
are represented by
Arrows.
Activities are
represented by nodes
( boxes or rectangles)
12. Project Time Management - Scheduling
12
Project Time Management includes the processes required to ensure timely
completion of the project:
Activity Duration Estimating - estimating the number of work periods which will
be needed
PERT uses three estimates to define an approximate range for an activity’s
duration:
Most likely (M). The duration of the activity, given the resources likely to be
assigned, their productivity, realistic expectations of availability for the activity,
dependencies on other participants, and interruptions.
Optimistic (O). The activity duration is based on analysis of the best-case
scenario for the activity.
Pessimistic (P).The activity duration is based on analysis of the worst-case
scenario for the activity.
13. Project Time Management - Scheduling
13
Project Time Management includes the processes required to ensure timely completion
of the project:
Schedule
Development -
analyzing activity
sequences,
activity duration
and resource
requirements to
create the project
schedule
A schedule
baseline is a
specific version of
the project
schedule
developed from
the schedule
network analysis.
It is accepted and
approved by the
project
management team
as the schedule
baseline with
baseline start
dates and baseline
finish dates.
14. Project Time Management - Scheduling
Project Time Management includes the processes required to ensure timely
completion of the project:
• Schedule Control - controlling changes to the project schedule
15. What is a Cost Estimate?
• Realistic representation of final project cost at any stage of project development
to meet a specific project objective
• Basic Components:
Base Estimate
+
Contingency
Total Cost Estimate
}
16. Owner's Purpose of Estimate
1. Making investment decision in the
conceptual stage.
2. Negotiate and finalize the
contract at the implementation
phase.
3. To implement cost control measures.
17. 01 02 03
Contractors Purpose of Estimate
Determine
project
cost and
profit.
To
Impleme
nt cost
control
measure
To develop
data base
for that can
be used for
future
project.
18. 1
3
4
Cost Estimate
2
1
Types of
Costs
Variable Costs: these costs change with the work
(cost of material, supplies, and wages).
Fixed Costs: theses costs do not change as work
changes (Set up, rental).
Direct Costs: these costs are directly attributable to
the work to the work (materials, team wages, and
recognition).
Indirect Costs: these costs are overhead items or
costs incurred for the benefit of one project
(taxes, fringe, and janitorial services).
19. Cost Estimate
• Life Cycle Costing:
looking at the cost of the
whole product life not just
the cost of the project.
• Value Analysis: finding
less costly ways to do
the same work.
21. Summary
Structured Project Development
& Execution Process and Total
Cost Management can help
achieve World-Class Project
Performance:
PROJECTS
Safer
Better
Cheaper
Faster