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Group 2 – Cost Management

Group 2 – Cost Management. Elmar Meyer Pierre Janse van Vuuren Nathi Ndlovu Ferdinand Chauke Moses Fakude. Process Chart – Cost Management. INITIATION. PLANNING. EXCECUTING. MONITORING & CONTROLLING. CLOSING. Estimate Cost Determine Budget. Control Costs. INITIATION. PLANNING.

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Group 2 – Cost Management

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  1. Group 2 – Cost Management Elmar Meyer Pierre Janse van Vuuren Nathi Ndlovu Ferdinand Chauke Moses Fakude PMP Exam Prep.

  2. Process Chart – Cost Management INITIATION PLANNING EXCECUTING MONITORING & CONTROLLING CLOSING • Estimate Cost • Determine Budget • Control Costs PMP Exam Prep.

  3. INITIATION PLANNING EXCECUTING MONITORING & CONTROLLING CLOSING Determine how you will do planning – part of all management plans Take action to control the project Estimate time and cost Measure performance against the performance measurement baseline Develop Budget Measure performance against other metrics determined by the Project Manager Determine all rolls and responsibilities Determine the variances and if they warrant a change request Go back to - iterations Influence the factors that cause changes Finalize the “how to execute and control” parts of all management plans Request Changes Develop final PM plan and performance measurement baseline that are realistic Create forecast PMP Exam Prep.

  4. Cost Management Plan • Includes: • Specifications of Estimates • Level of Accuracy • Reporting Formats • Rules for measuring Cost Performance • Whether cost include both direct & indirect costs • Control Thresholds PMP Exam Prep.

  5. Cost Management Concepts 1 of 3 • Life Cycle Costing • Looking at the cost of the whole life of the project, not just the cost of the project. • Explain: • If you reduce the quality of a project in order to save project costs, but due to the reduction in quality, the maintenance of the project increases more than the saving …. This is not good planning. PMP Exam Prep.

  6. Cost Management Concepts 2 of 3 • Value Analysis • Also referred to as Value Engineering • It involves finding a more cost effective way of producing the same product, without compromising the scope or quality. PMP Exam Prep.

  7. Cost Management Concepts 3 of 3 • Cost Risk • Based on the risk of procurement contracts. • Example: • Q: Who has the cost risk in a fixed price contract? • A: The seller. • Definition: • Seller = Contractor, and or, sub-contractor to the project • Buyer = Employer PMP Exam Prep.

  8. Estimate Costs • The process where the estimates for each activity are made in order to determine the budget. • Cost of quality efforts • Cost of risk efforts • Cost of the PM’s time • Cost of Project Management activities • Direct costs • Indirect costs • Profit • Overhead costs (P&G’s) PMP Exam Prep.

  9. Types of Costs • Variable Costs • This cost change with the a change in the amount of work • Fixed Costs • This cost will not change, eg. Setup and rental cost • Direct Costs • Directly related to the work on the project, ie. Travel, team wages, materials • Indirect Costs • These are overhead items, ie taxes and benifits PMP Exam Prep.

  10. Inputs to Estimating Costs • Scope Baseline • Project Schedule • HR Plan • Risk Register • Organizational Process Assets (Lessons learned, Hist.) • Company Culture • Project Management Costs PMP Exam Prep.

  11. How is Estimating Done? 1 of 2 • It’s a “Bottom up” process • Start with each work package, and combine, until total figure. • This process requires an accurate WBS, and schedule. • Advantages. • More accurate • Gains buy-in from the team • Based on a detailed analysis • Provides a basis for monitoring and controlling • Disadvantage • Takes time • Tendency for the team to pad estimates unless taught about reserves • Requires that the project be defined and well understood before work starts. PMP Exam Prep.

  12. How is Estimating Done? 2 of 2 • Analogous Estimate • Advantages • Less costly to create • Give the PM an idea of the level of Management’s expatiation • Overall project costs will be capped • Disadvantages • Requires considerable experience to do it well • Infighting to gain the biggest piece of the budget without being able to justify the need • Extremely difficult for projects with uncertainties • Does not take into account the differences between projects PMP Exam Prep.

  13. Contributions to Creation of Estimates • Project Management Software • Combination of various software packages • Determining Resource Cost Rates • Gathering of all recourse costs for specific project • Reserve Analysis • Allowing contingencies and Risk allowances • Cost of Quality • Cost of work for quality planning PMP Exam Prep.

  14. Accuracy of Estimates • ROM • Rough order of magnitude estimate +/- 50% (Initiation Phase) • Budget • Range of -10% to 25% accuracy (Planning phase) • Definitive Estimate • More accurate ( Monitoring Phase) PMP Exam Prep.

  15. Thank You PMP Exam Prep.

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