Some Concepts in Project Cost Management
Costing Involves:
1. cost to purchase, develop i.e. to have the system
2. Operation cost
3. Cost to disposal
Value Engineering:
Get the most from a project
–decrease cost
–increase value
–increase quality
–shorten schedule
–keep project scope not reduced
COST ESTIMATING
When cost estimation is done?
After project scope is defined, and work breakdown structure is created.But may be performed again and again over the total life cycle
Tools
Analogous Estimating
Based on the similar actual projects
Bottom up estimating:
Estimate cost for each activity and sum them – time consuming
Parametric Estimating
1 mile road construction needs $400,000$. So 10 miles will require 10*400,000$.
Reserve Analysis
A buffer cost against slippage on the project
Cost of Quality
Costs required in order to get quality
Output
Activity Cost Estimates
COST BUDGETING
Maps costs and dates. How much will be spent on what and when. Also termed Cost Baseline
When cost budgeting is done?
After activities are defined and scheduled. Activity durations and resource requirements are also estimated.
Tools
Cost Aggregation
Activity level costs should be aggregated to the work level where they will be measured, managed, and controlled.
Reserve Analysis
Financial reserve to protect projects against cost overrun
Parametric Estimating
Use simple straight forward formulas
Funding Limit Reconciliation
Comply with the project funding. many times funds are allocated even before the scope is defined.
Output
Cost Baseline
Project Funding requirements
COST CONTROL
Monitoring, controlling, adjusting costs
When it is performed?
Over the whole life cycle. Bi-weekly or monthly analysis may be done
Tools
Cost Change Control System
How the cost baseline may be changed
Performance Measurement Analysis
Calculate Earned Value, Planned Value, Actual Cost, Estimate to complete, Estimate at Completion, Cost Performance Index and similar to measure performance and control costs based on these
Forecasting
Use current and previous cost values to estimate future costs
Variance Management
Output
Cost Estimate Update
Cost Baseline Update
Performance Measurement Analysis will be discussed later
From: http://sitestree.com/?p=4799
Categories:PMP – Project Management
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Post Data:2011-04-22 02:11:46
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