Project Cost Management

Project Cost Management

Other considerations:
Though in many application areas, predicting and analyzing the prospective financial performance of the project’s product is done outside of the project, in others, it is included in Project Cost Management:
For example:  Capital Facilities Projects
In this case, Project Cost Management will draw on other general management areas:

• Return on Investment (ROI)
• Discounted Cash Flow
• Investment Payback Analysis

Project Cost Management must consider the needs of the stakeholders who may measure costs in different ways and at different times.
The Develop Project Management Plan process produces a Cost Management Plan that sets out the format and established the criteria for planning, structuring, estimating, budgeting and controlling project costs.

Cost Aggregation:

Schedule activity cost estimates are aggregated by work package in accordance with the WBS

In turn, work package estimates are further aggregated according to schedule structure or other parameters, such as control account, and ultimately for the entire project.

Reserve analysis:

Establishes contingency and management reserves, i.e. allowances for unplanned, but potentially required, changes (see next slide)

Parametric Estimating:

Described in Cost Estimating

Funding Limit Reconciliation:

Since large variations on periodic expenditures are undesirable for organizational operations, the project expenditure of funds is reconciled with funding limits set by the customer or performing organization

May necessitate the scheduling of work to be smoothed and adjusted to limit expenditures in certain periods

Involves setting date constraints and iteratively re-scheduling and budgeting

Requested Changes

Budget increases or decreases can be identified from the analysis of performance – processed for review and disposition through the Integrated Change Control process

Recommended Corrective Actions

Anything done to bring future project performance back in line with the project management plan

In cost management, can involve adjusting schedule activity budgets to fund actions to address cost variances

Updates to Organizational Process Assets

Documentation of lessons learned linked to root cause of variances and corrective actions taken

Updates to Project Management Plan

Schedule activity, work packages or planning package cost estimates

Cost baselines or cost management plan

Approved changes are integrated to the project management plan

Project Communications Management

Project Communications Management

“The processes used in the exchange of information. “
90% Of project manager’s job
Affects every part of a project
Can make or break a project
Employed by everyone involved

We Retain/Absorb:

10% Of What We Read

20% Of What We Hear

30% Of What We Read and Hear

50% Of What We Discuss With Others

80% Of What We Experience

90% Of What We Teach to Others

Anything that distorts, distracts or otherwise causes the message to lose its original meaning:

• Language
• Culture
• Semantics
• Intelligence/Knowledge Level
• Message Content
• Authority/Reputation
• Emotional Status

Art of Communication

The art of communication is a broad subject and involves a substantial body of knowledge including:

• Sender - receiver models: Feedback loops and barriers to communication
• Choice of media: When to communicate and how, informal vs formal, face-to-face vs e-mail.
• Writing style:  Active versus passive voice, sentence structure and word choice
• Presentation techniques: Body language and design of visual aids
• Meeting management techniques: Preparing an agenda and dealing with conflict

Project Cost Analogous Estimating Technic

Project Cost Analogous Estimating Technic 

Analogous cost estimating means using the actual cost of previous, similar projects as the basis for estimating the cost of the current project. Analogous cost estimating is frequently used to estimate costs when there is a limited amount of detailed information about the project (e.g., in the early phases). Analogous cost estimating uses expert judgment.

Analogous cost estimating is generally less costly than other techniques, but it is also generally less accurate. It is most reliable when previous projects are similar in fact, and not just in appearance, and the persons or groups preparing the estimates have the needed expertise.

Critical Chain Method network analysis technique

Critical Chain Method network analysis technique 

Critical chain is another schedule network analysis technique that modifies the project schedule to account for limited resources. Critical chain combines deterministic and probabilistic approaches. Initially, the project schedule network diagram is built using non-conservative estimates for activity durations within the schedule model, with required dependencies and defined constraints as inputs. The critical path is then calculated. After the critical path is identified, resource availability is entered and the resource-limited schedule result is determined. The resulting schedule often has an altered critical path.

The critical chain method adds duration buffers that are non-work schedule activities to maintain focus on the planned activity durations. Once the buffer schedule activities are determined, the planned activities are scheduled to their latest possible planned start and finish dates. Consequently, in lieu of managing the total float of network paths, the critical chain method focuses on managing the buffer activity durations and the resources applied to planned schedule activities.