PROJECT TIME MANAGEMENT
PROJECT COST MANAGEMENT:
Project Cost Management is a group of processes required to ensure the project is completed within the approved budget
There are following processes which are part of Project Cost Management.
Resource Planning:
Determining physical resources needed (i.e., material, equipment, and people) and what quantities of each should be used and when they would be needed to perform project activitiesCost Estimating:
Process of developing an approximation (or estimate) for the cost of the resources necessary to complete the project activities.Cost Estimating process is a part of "Project Planning Phase".
Cost Estimating when creating a budget for a job, project management must be able to engage properly in the process of cost estimating. This is a calculated projection of the cost for the materials required by the project. The materials considered in cost estimating can be any resources required for the job such as raw materials or employee wages.
It is critical for a true approximation of the production costs that those in project management take into account all resources which might be used. Neglecting certain materials could result in cost estimating which is too low. This increases the likelihood that the budget will be exceeded.
Accurate cost estimating by project management needs to be done often when creating a bid for the project. Too high of an estimate, and the bid could be lost to another company. A bid which is falsely low will result in unanticipated costs the client will have to pay, and that could damage the chances of future business with that customer. Knowing the true price of the project is important for anyone in management in order to create a budget for the job and to make bids.
Cost Estimating - Tools & Techniques
Analogous estimating : Analogous estimating is also called top-down
estimating and uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project. It is frequently used to estimate total project costs when there is a limited amount of detailed information about the project. Analogous estimating is a form of expert-judgment.
Determine Resource Cost Rates: The person determining the rates or the group preparing the estimates must know the unit cost rates, such as staff cost per hour and bulk material cost per cubic yard, for each resource to estimate schedule activity costs.
Bottom-up estimating : Estimating the cost of individual work items and then rolling up the costs to arrive at a project total - more accurate.
Parametric modeling : Using project characteristics (or parameters) in a mathematical model to predict costs (e.g., price per square foot).
Project Management Software: Project management software, such as cost estimating software applications, computerized spreadsheets, and simulation and statistical tools, are widely used to assist with cost estimating.
Vendor Bid Analysis: In cases where projects are won under competitive
processes, additional cost estimating work can be required of the project team to examine the price of individual deliverables, and derive a cost that supports the final total project cost.
Reserve Analysis: Many cost estimators include reserves, also called contingency allowances, as costs in many schedule activity cost estimates.
Cost of Quality: Cost of quality can also be used to prepare the schedule activity cost estimate.
Cost Budgeting:
Allocating the value of the overall cost estimate to individual work items, in order to establish a cost baseline for measuring projectperformance.
Cost Budgeting estimating is part of "Project Planning Phase".
To create an effective cost budgeting plan, a total budget for the entire project must first be established. To achieve this, each area of the project must be
analyzed and given a particular cost estimate. Once that is done, the total sum of cost assessments, whether those costs are in individual projects or in work
packages, are combined to establish a certain parameter to provide a working guideline for the budget. These guidelines are set in place so that the allotted costs are divvied up amongst the appropriate project needs. This will ensure that the budget goals are being accurately met. The process of cost budgeting is a simple, yet necessary process of any successful type of project management.
Cost Budgeting - Tools & Techniques
Cost Aggregation: Schedule activity cost estimates are aggregated by work packages in accordance with the WBS. The work package cost estimates are then aggregated for the higher component levels of the WBS, such as control accounts, and ultimately for the entire project.
Reserve Analysis: Reserve analysis establishes contingency reserves, such as the management contingency reserve, that are allowances for unplanned, but potentially required, changes. Such changes may result from risks identified in the risk register
Parametric Estimating: The parametric estimating technique involves using project characteristics (parameters) in a mathematical model to predict total project costs.
Funding Limit Reconciliation: Large variations in the periodic expenditure of funds are usually undesirable for organizational operations. Therefore, the
expenditure of funds is reconciled with the funding limits set by the customer or performing organization on the disbursement of funds for the project.