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Created by ejlp12@gmail.com, June 2010,[object Object],7 - Project Cost Management,[object Object],Project Management Training,[object Object]
Project Cost Management,[object Object],Monitoring &,[object Object],Controlling Processes,[object Object],Planning,[object Object],Processes,[object Object],Enter phase/,[object Object],Start project,[object Object],Exit phase/,[object Object],End project,[object Object],Initiating,[object Object],Processes,[object Object],Closing,[object Object],Processes,[object Object],Executing,[object Object],Processes,[object Object]
Project Cost Management,[object Object],The process involved in estimating, budgeting, and controlling cost so that the project can be completed within approved budget,[object Object],Life cycle costing,[object Object],Looking at the cost of whole life of the product (include maintenance),[object Object],Value analysis (value engineering),[object Object],Looking at less costly way to do the same work within the same scope,[object Object],Law of Diminishing Returns,[object Object],E.g. adding twice resource to task may not get the task done in half cost/time,[object Object],[object Object]
Cost will also affect the schedule
Cost risk vs. Type of contract,[object Object]
Types of Cost,[object Object],Variable Costs,[object Object],Change with the amount of production/work ,[object Object],e.g. material, supplies, wages,[object Object],Fixed Costs,[object Object],Do not change as production change,[object Object],e.g. set-up, rental,[object Object],Direct Costs,[object Object],Directly attributable to the work of project,[object Object],e.g. team travel, recognition, team wages,[object Object],Indirect Costs,[object Object],overhead or cost incurred for benefit of more than one project,[object Object],e.g. taxes, fringe benefit, janitorial services,[object Object]
Quality/Accuracy of Cost Estimation,[object Object],[object Object]
Used to finalize the Request for Authorization (RFA), and establish commitment, made during planning phase
During the project and refined,[object Object]
Cost Aggregation,[object Object],Reserves & risk management are important  while estimating!,[object Object],Contingency reserves:  Cost Baseline the cost impacts of the remaining risk,[object Object],Management reserves:  Cost Budgetextra fund to cover unforeseen risk or changes to the project,[object Object],Cost Budget,[object Object],Management reserves,[object Object],Cost baseline,[object Object],Contingency reserves,[object Object],Project estimates,[object Object],Control account estimates,[object Object],Work package estimates,[object Object],Activity estimates,[object Object]
Determines Budget: Other considerations,[object Object],High level parametric estimate as a rule of thumb,[object Object],E.g. testing cost 50% of development cost,[object Object],Funding limit reconciliation = checking cash flow,[object Object],When the money will be available? ,[object Object],Reconciliation needed before proposed cost baseline and cost budget become final,[object Object],Such reconciliation is part of integration management,[object Object]
7.3 Control Cost,[object Object],The process of monitoring the status of the project to update the project budget and managing changes to the cost baseline,[object Object]
How to control cost?,[object Object],Follow the cost management plan,[object Object],Look at any organizational process asset that are available,[object Object],Manage change,[object Object],Recording all appropriate change,[object Object],Preventing incorrect change,[object Object],Ensuring requested changes are agreed upon,[object Object],Managing the actual changes when and as they occur,[object Object],Measure and measure and measure (monitoring),[object Object]
Progress Report,[object Object],Progress/performance report (output from communication area),[object Object],Where work cannot be measured, estimate could be done by a guess,[object Object],Percent complete:,[object Object],50/50 Rule,[object Object],20/80 Rule,[object Object],0/100 Rule,[object Object],Activity is considered X percent complete when it begins and get credit for the last Y percent only when it is complete,[object Object]
Earned Value Management,[object Object],Method to measure project performance against scope, schedule and cost baseline (performance measurement baseline),[object Object],Interpretation of basic EVM performance measures,[object Object],Cost Performance Index (CPI),[object Object],Schedule Performance Index (SPI),[object Object],Image captured from Practice Standard for Earned Value Management, PMI  © 2005,[object Object]
Earned Value Technique,[object Object],Example:Project Budget: $400KProject Schedule: 4 monthsAt the 3 month checkpoint:Spent: $200KWork completed: $100K,[object Object],Revised Total Duration ,[object Object],Baseline Duration/Schedule Performance Index,[object Object],4/0.33,[object Object],= 12 months,[object Object],Slide adapted from the original  which taken from www.alphaPM.com,[object Object]
Earned Value Technique,[object Object],EAC is an important forecasting value.,[object Object]
Earned Value: Graphical Representation,[object Object],TODAY,[object Object],(Reporting day),[object Object],Projection of ,[object Object],schedule delay ,[object Object],at completion,[object Object],Estimate at Completion,[object Object],(EAC),[object Object],EAC,[object Object],Projection of ,[object Object],cost variance ,[object Object],at completion,[object Object],(VAC) ,[object Object],BAC,[object Object],AC,[object Object],Budget at Completion,[object Object],(BAC),[object Object],COST,[object Object],Cost,[object Object],Variance,[object Object],(CV),[object Object],PV,[object Object],Schedule,[object Object],Variance (SV),[object Object],ACTUAL,[object Object],EV,[object Object],PLAN,[object Object],EARN,[object Object],VALUE,[object Object],TIME,[object Object],Project is over budget & behind schedule ,[object Object]
Earned Value Management,[object Object],EV can be calculated by ,[object Object],(%progress) x (planned man-days),[object Object],Image captured from Practice Standard for Earned Value Management, PMI  © 2005,[object Object]
Exercise,[object Object],[object Object]
Using the following project status chart, calculate PV, EV, AC, BAC, CV, CPI, SV, SPI, EAC, ETC, VAC.
Describe your interpretation based on the calculation!,[object Object]
Exercise Solution,[object Object],[object Object]
 ahead schedule, progressing 101% of the rate planned,
probably will spend  $6818 at the end (estimation),
 need $3368 to complete,
 over budget at the end for about $818 (estimation),[object Object]

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