Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project:
Direct Costs
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The people that can influence the estimates include the members creating the estimates and the members who are responsible for implementing the new project. When considering how people affect estimates, it can include anything from skills of people creating estimates; to people responsible for learning the new technology; the turnover rate; and even the amount of productive hours each team member can contribute on a daily basis. "It should also be noted that adding new people to a project increases time spent communicating." (Gray, et al 2005) The organization culture can also have a large impact on the effectiveness of project estimates. In some cultures, it may be acceptable to pad estimates in order to avoid a situation where there is not enough time or money. In other business atmospheres, they may frown upon inaccurate estimates and may take adverse action if this done. An organization's culture can dictate how each project manager should make their estimates and therefore may contribute to a more accurate estimate for both time and costs. As with any other topic in project management, there are also "non-project factors" that can contribute to the estimate's accuracy. Since this project is working with new technology, the project may experience some downtime due to machine malfunctions or server problems. A team must also factor in holiday schedules, available resources, and certain
Various documents such as a project scope statement, one-time cost or recurring cost worksheet can be created to list costs associated with the project. Other methods include the time value of money, which refers to comparing present cash outlays to future expended returns, and a break-even analysis in order to determine economic feasibility.
project data from work breakdown structures and schedules" and comparing it to "topdown project goals." After this, the teams are to estimate investment risks
Project A: This project is new to your company. You do not feel confident in estimating the project costs using internal resources. There are other companies that have done this type of work. Yet you still want the most accurate estimates possible.
592 Week 1 DQ 1 WBS Construction PROJ 592 Week 1 DQ 2 Project Cost Estimates and Assumptions PROJ 592 Week 2 DQ 1 Cost Components PROJ 592 Week 2 DQ 2 Estimating Processes PROJ 592 Week 3 DQ 1 Project Schedules PROJ 592 Week 3 DQ 2 Sensitivity Analysis PROJ 592 Week 4 DQ 1 Resource Allocation and Leveling PROJ 592 Week 4 DQ 2 Advanced Schedule Techniques PROJ 592 Week 5 DQ 1 Earned Value Calculation PROJ 592 Week 5 DQ 2 Project Monitoring and Control & EV PROJ 592 Week 6 DQ 1 Forecasting Project Completion Cost PROJ 592 Week 6 DQ 2 Project Control PROJ 592
internally to establish costs and budgets for the project. The goal is to act according to the curve.
The earned value analysis has led to see the project will control the actual budget, which is $18,000. The actual cost at the period 4 totaled to be $7,050, and total of earned value at period 4 is $7,750. The estimate at completion for typical is $22,550. These variances show that this project will exceed the original budget of $18,000, so we are still exceeding the project’s original budgets. The SPI is less than a value of 1, which means that the project will also over schedule and activity plans. The requests immediate actions from the third-party company.
Cost and Value management is becoming a large part of companies competing in today’s market. According to the text, “projects and their effective management can provide organizations with a significant competitive edge through cost reduction, enhanced responsiveness, and overall value to customers.” (Venkataraman & Pinto, 2008, p. 1). In this paper we are going to focus on some of the techniques and how they can either help or hinder a project. Through information and examples we will explore the importance of work packages and the work breakdown structure (WBS), establishing a cost and schedule performance
During project planning, if you have inaccurate and low estimations this will obviously put you over budget. Some Pollyannaish PMs tend to write exaggeratedly enthusiastic estimates. The PM must rely on documenting and qualifying their figures and believe in the importance of pertinent historical data.
We used PV (planned Value), AC (actual cost), and EV (earned value) to calculate SPI (schedule performance index), SV (schedule variance), CPI (cost performance index), and CV (cost variance). Among these indicators, SPI and SV show whether a project is behind schedule or not, and CPI and CV indicate whether a project is under budget. Therefore, the statuses of the schedule and cost of technical infrastructure, software customization, and combined projects can be easily and clearly checked, respectively.
‘’Cost performance on project s often poor, what are the possible causes of this and how can it be improved?’’
1. Discuss the principal reasons why project management has become such a popular business tool in recent years.
ABI is using a top-down process in this project, meaning that determination of the final budget comes almost strictly from a compilation of experiences and judgments of the top and mid-level managers in the company. The higher-level managers break down costs into major categories, pass down their cost estimates to the next lowest level, lower-level managers break the major categories down into subcategories and so on until the estimation process reaches the lowest level of the company. By the end, each level knows the specific amount of money that it is allotted to complete the project tasks required at that level. Because the project is so extensive in price and risk, it would have been smarter for them use a bottom-up process which would have involved the employees who would actually be part of the work team so that management could get a more accurate estimate of the time and money that would be required to complete the project.
7.0 Budget Estimate and Financial AnalysisA preliminary estimate of the cost for the entire project is $200,000. This includes the hire of a temporary project manager, and the hours used by current employees to work on the project. Project savings comes in the form of reduced health insurance cost due to a healthier workforce that makes fewer claims.
This technical dimension includes planning, scheduling, and controlling projects. The sociocultural dimension is a much messier, and often contradictory and paradoxical world of implementation. Some suggest that the technical dimension represents the “science” of project management while the sociocultural dimension represents the “art” of managing a project. A manager needs to be a master at both to be successful.
* Not emphasizing the importance of realistic project cost estimates from the outset. IT project cost estimates are low to start with or based on unclear project requirements.