Project managment 6

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Project managment 6

  1. 1. 1/8/2011 Project Management Knowledge Areas Section – 3 Chapter – 7 p Project Cost Management Session Objectives… 1. To identify Project Cost Management y j g Knowledge Area Processes 2. How to estimate approximate costs of the resources needed 3. How to aggregate and determine budgeted costs of project and to develop the Cost Baseline 4. How to Control the influencing factors that create variances to the project budget 1
  2. 2. 1/8/2011 Project Cost Management Exam Objectives… 1. 1 Estimating Costs of schedule activities 2. Developing Cost baseline 3. Implementing Cost Control 4. 4 Measuring Project Performance Project Cost Management Is primarily concerned with the cost of p the resources needed to complete schedule activities. Also considers Cost of using, Cost of maintaining Cost f C t of supporting th product, ti the d t service or result Is also called as Life-Cycle Costing 2
  3. 3. 1/8/2011 Project Cost Management The Processes in Project Cost Management are: 1. Estimate Costs 2. Determine Budget 3. Control Cost These processes interact with each other and with processes in the other knowledge areas Each process occurs once in every project Smaller projects scope, estimating costs and determining budget are viewed as a single process Project Cost Management Establishes… o Level of accuracy y Rounding of data to a prescribed precision o Units of measure Each unit used in measurement, such as staff hours/staff days is defined o Organizational procedures The WBS component used for the project cost accounting is called a control account. This account is assigned a code that is linked to organization’s accounting system 3
  4. 4. 1/8/2011 Project Cost Management Establishes… o Control thresholds Variance thresholds for costs or other indicators such as person-days, can be defined to indicate the agreed amount of variation allowed o Performance Measurements rules EVM calculating formulas are defined o Reporting formats o Process description Estimate Costs Estimate Costs is the process of g calculating the costs of the identified resources needed to complete the project work. Estimate Costs is the cost of the resources required to complete the p j project work & Pricing includes a profit g p margin Estimates are generally expressed in units of currency 4
  5. 5. 1/8/2011 Estimate Costs • • • • • 1. Scope Baseline 2. Project Schedule 3. Human Resource Plan 4. Risk Register 5. Enterprise Environmental Factors • 6. Organizational Process Assets Input Tools & Techniques • • • • • • • • 1. Expert Judgment 2. Analogous Estimating 3. Parametric Estimating 4. Bottom-Up Estimating 5. Three-Point Estimates 6. Reserve Analysis 7. Cost of Quality 8. Project Management Estimating Software • 9.Vender Bid Analysis • 1. Activity Cost estimates • 2. Basis of Estimates • 3. Project Document Updates Output Estimate Costs Inputs 1. Scope Baseline p 2. Project Schedule 3. Human Resource Plan 4. Risk Register 5. Enterprise Environmental Factors 6. Organizational Process Assets Cost estimating policies & templates Historical information Lessons learned 5
  6. 6. 1/8/2011 Estimate Costs Tools and Techniques 1. Expert J g p Judgment 2. Analogous Estimating 3. Parametric Estimating 4. Bottom-up Estimating 5. Three-Point Estimates 6. Reserve Analysis 7. Cost of Quality 8. Project Management Estimating Software 9. Vender Bid Analysis Estimate Costs Outputs 1. 1 Activity Cost Estimates 2. Basis of Estimates 3. Project document Updates 6
  7. 7. 1/8/2011 Cost Estimating Techniques Three Point Estimates is to improve accuracy and reduce risk factors, Program Evaluation and Review Technique (PERT) is used Most likely (Cm) Optimistic (Co) Pessimistic (C ) P i i i (Cp) Weighted average of the activity cost is (Co + 4 X Cm + Cp) / 6 stages of planning Cost Estimating Techniques Analogous Estimating Relies on historical information to predict p the cost of the current project Also knows as top-down estimating It’s a form of expert judgment Bottom-up Estimating Calculates cost of each component of the WBS, d i WBS and arrives at a sum f the project t for th j t Most time consuming and expensive method Most accurate method 7
  8. 8. 1/8/2011 Cost Estimating Techniques Parametric Estimating Uses mathematical model based on known parameters to predict the cost of a project Usually calculated cost per unit Types of parametric estimating Regression analysis:- a statistical approach to predict future values, based on historical values Learning curve:- Cost per unit decreases the more units workers complete Cost Estimating Techniques Reserve analysis Is also called as contingency reserve Used to meet cost overruns due to risks that have impacted the projects’ cost baseline 8
  9. 9. 1/8/2011 Determine Budget Determine budget is aggregating the estimated costs of individual schedule activities to determine total cost of the project The cost baseline is used for measuring project performance Determine Budget • 1. Activity Cost Estimates • 2. Basis of Estimates • 3. Scope Baseline • 4. Project Schedule • 5. Resource Calendars • 6. Contracts • 7. Organizational Process Assets Input Tools & Techniques • 1. Cost Aggregation • 2. Reserve Analysis • 3. Expert Judgment • 4. Historical Relationships • 5. Funding Limit Reconciliation • 1. Cost Performance Baseline • 2. Project Funding Requirements • 3. Project Document Updates Output 9
  10. 10. 1/8/2011 Determine Budget Inputs 1. 1 Activity Cost Estimates 2. Basis of Estimates 3. Scope Baseline 4. Project Schedule 5. 5 Resource Calendars 6. Contracts 7. Organizational Process Assets Determine Budget Tools and Techniques 1. 1 Cost Aggregation 2. Reserve Analysis 3. Expert Judgment 4. Historical Relationships 5. 5 Funding Limit Reconciliation 10
  11. 11. 1/8/2011 Determine Budget Outputs 1. 1 Cost Performance Baseline 2. Project Funding Requirements 3. Project Document Updates Tools & Techniques Historical Relationships o Result in parametric or analogous estimates involved to develop mathematical models to predict total costs o Models reliability can be improved by Accurate historical information Quantifiable parameters Scalable models o Ex. Cost per sqr.ft. 11
  12. 12. 1/8/2011 Control Cost Cost control focuses on the ability of costs to change and on the ways of allowing or preventing cost changes from happening Is concerned with understanding the cost variances. As cost variances happen, they must be examined, recorded, and investigated. Control Cost Cost control focuses on… Controlling causes of change to ensure the changes are actually needed Controlling and documenting changes to the cost baseline as they happen Controlling changes in the project and their influence on cost h fl Performing cost monitoring to recognize and understand cost variance 12
  13. 13. 1/8/2011 Control Cost Cost control focuses on… Recording appropriate cost changes in the cost baseline Preventing unauthorized changes to the cost baseline Communicating the cost changes to the p p proper stakeholders Working to bring and maintain costs within acceptable range Control Cost • 1. Project Management Plan • 2. Project Funding Requirements • 3. Work Performance Information • 4. Organizational Process Assets Input Tools & Techniques • 1. Earned Value Management • 2. Forecasting • 3. To-Complete • Performance Index •4 P f 4. Performance Reviews R i • 5.Variance Analysis • 6. Project Management Software • 1. Work Performance Measurements • 2. Budget Forecasts • 3. Organizational Process Assets Updates • 4. Change Requests • 5. Project • Management Plan Updates • 6. Project Document Updates Output 13
  14. 14. 1/8/2011 Control Cost Inputs 1. 1 Project management plan 2. Project funding requirements 3. Work performance information 4. Organizational Process Assets Control Cost Tools and Techniques 1. 1 Earned Value Management 2. Forecasting 3. To-Complete Performance Index 4. Performance reviews 5. 5 Project management software 14
  15. 15. 1/8/2011 Control Cost Outputs 1. 1 Work Performance Measurements 2. Budgeted Forecasts 3. Organizational Process Assets Updates 4. Change Requests 5. 5 Project Management Plan Updates 6. Project Document Updates Project Cost Management To Sum up… 1. We know Project Cost Management j g Knowledge Area Processes 2. We know how to estimate an approximate costs of the resources needed 3. We know how to aggregate the estimated costs of individual activities to establish a Cost Baseline 4. We know how to Control the influencing factors that create variances to the project budget 15
  16. 16. 1/8/2011 Questions ? 16

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