Bài giảng PMBOK - Chapter 6: Project Cost Management

Chapter 6:Project Cost Managementadopted from PMI’s PMBOK 2000 and Textbook : Information Technology Project Management (author : Dr. Kathy Schwalbe)1ContentsImportance of Project Cost ManagementProblem: cost overrun and cannot meet cost goalsCosts are measured in monetary unitsProject Cost ManagementResource planning, Cost estimating, Cost budgeting, Cost controlResource Planning considerationdifficulty, uniqueness, track record, people, equipment and materials Types of cost estimatebasic tools and techniquesEarned value management is an important tool for cost control2The Importance of Project Cost ManagementIT projects have a poor track record for meeting cost goalsAverage cost overrun from 1995 CHAOS study was 189% of the original estimates; improved to 45% in the 2001 studyIn 1995, cancelled IT projects cost the U.S. over $81 billionChapter 63Typical allocation of cost4What is Cost and Project Cost Management?Cost is a resource sacrificed or fore-gone to achieve a specific objective or something given up in exchangeCosts are usually measured in monetary units like dollarsThis is the process group to ensure the project is completed within the approved budget. The major output is the cost management planThere are 4 processes in Project Cost ManagementChapter 65Project Cost Management ProcessesResource planning (planning phase)determining what resources and quantities of them should be usedCost estimating (planning phase)developing an estimate of the costs and resources needed to complete a projectCost budgeting (planning phase)allocating the overall cost estimate to individual work items to establish a baseline for measuring performanceCost control (control phase)controlling changes to the project budgetChapter 66Basic Principles of Cost ManagementMost CEOs and boards know a lot more about finance than IT, IT project managers must speak their languageProfits are revenues minus expensesLife cycle costing is estimating the cost of a project over its entire lifeCash flow analysis is determining the estimated annual costs and benefits for a projectBenefits and costs can be tangible or intangible, direct or indirectSunk cost should not be a criteria in project selectionChapter 67Cost of Software DefectsIt is important to spend money up-front on IT projects to avoid spending a lot more later.Chapter 68Resource Planning8th of 21 planning phase process The nature of the project and the organization will affect resource planningSome questions to consider:How difficult will it be to do specific tasks on the project?Is there anything unique in this project’s scope statement that will affect resources?What is the organization’s history in doing similar tasks?Does the organization have or can they acquire the people, equipment, and materials that are capable and available for performing the work?9Inputs to Resource PlanningWBSidentifies the project elements that require resources.Historical informationidentifies required resourced used in similar work on previous project.Scope statementcontains the project justification and the project objectives.Resource pool descriptionidentifies available project resources.Organizational policiesmay impact some of the project management decision. These are constraints, such as staffing, rentals, and purchasing supplies and equipment.Activities duration estimatesthe best estimates of the time that it will take to perform the workIt is the output of Time Management Process: Activity Duration Estimating.10Tools & techniquesExpert judgmentaccess the inputs to the process by subject-matter expect, group, or individual, including consultants, professional or technical associations, industrial advisory groups.Project management softwarehelp to organize resource pools, define resource availabilities and their rates, and define resource calendars.11Outputs from Resource PlanningResources requirementdescribes the types (e.g. skills levels) and number of resources required by each element of the WBS.12Cost Estimating9th planning phase processcollecting and predicting the costs over the life cycle of a project or phase of a projectdeveloping cost estimates for all the resources needed to complete project activities. An important output of project cost management is a cost estimateThere are several types of cost estimates and tools and techniques to help create themIt is also important to develop a cost management plan that describes how cost variances will be managed on the projectChapter 613Inputs to Cost Estimating (1)WBSResource requirement Outputs from Resource PlanningResource rates – unit rates for each resource that are used to calculate project costs.Activities duration estimatesoutput of Time Management Process: Activity Duration Estimating.Estimating publicationprovide commercial cost data.14Inputs to Cost Estimating (2)Historical informationthe cost of many categories of resources is available from the following sources: a) project file; b) commercial cost-estimating databases; c) project team knowledge.Chart of accounts (COA)describes the coding structure or the budget categories that the performing organization uses to report financial information in its general ledger. Riskto show the importance of considering the impacts of both opportunities and threats for costs estimates for each activity15Tools & techniquesAnalogous estimating known as top-downA form of expert judgment because it uses actual costs from previous, similar projects to estimate current costsAlthough it is less costly than other estimates, it is the least accurateIt is frequently used to estimate total project costs when a limited amount of detailed information is available. Parametric modelinguses project characteristics as the parameters is a mathematical model to predict project costsModels may be simple or complex (e.g. simulations using statistics or function point analysis to estimate software development durations)The costs and accuracy of parameters model vary.16Tools & techniques (2)Bottom up estimatingestimating the cost of individual activities or work packages and then adding the individual estimates to arrive at a project totalDefining smaller activities or work packages increases both the cost and accuracy of the estimate.Computerized toolsProject management software, spreadsheets, simulation tools, and statistical packages can help estimate costs.Other cost estimating methodsincludes vendor bid analyses.17Types of Cost EstimatesChapter 618Outputs from Cost Estimating Cost estimatesQuantitative assessments of the likely costs of the resources required to complete project activities. Cost estimates types includepreliminary estimatebudget estimateanalogy estimatesdefinitive and control estimatesSupporting detailsinclude description of the scope of work estimated, reference to WBS, the basis of the estimate, assumptions, and the range of possible results.Cost management plandescribe how cost variances will be managed. It is part of the project plan.19Constructive Cost Model (COCOMO)Prof Barry Boehm helped develop the COCOMO models for estimating software development costsa famous parametric model for software development industryParameters include source lines of code or function points (these two are common parameters to measure the complexity of a program)COCOMO II is a computerized model available on the webBoehm suggest that only parametric models do not suffer from the limits of human decision-makingChapter 620Typical Problems with IT Cost EstimatesDeveloping an estimate for a large software project is a complex task requiring a significant amount of effort.Remember that estimates are done at various stages of the projectMany people doing estimates have little experience doing them.Try to provide training and mentoringPeople have a bias toward underestimationReview estimates and ask important questions to make sure estimates are not biasedManagement wants a number for a bid, not a real estimate.Project managers must negotiate with project sponsors to create realistic cost estimatesChapter 621Cost Budgeting10th of 21 planning process It is the process of allocating cost estimates to individual work activatesCost budget involves allocating the project cost estimate to individual work items and providing a cost baselineFor example, in the Business Systems Replacement project, there was a total purchased costs estimate for FY97 of $600,000 and another $1.2 million for Information Services and TechnologyThe project budget is the planned cost of each activity at the lowest level, which is then rolled into a project total. Chapter 622Inputs to Cost BudgetingCost estimatesoutput from cost estimates processWBSoutput from scope definition processProject scheduleincludes planned start and expected finish dates for the activities or work packages in order to allocate costs.Risk management planA part of the project plan that contains procedures to manage risk throughout the project.23Outputs from Cost BudgetingCost baselineA time-phased budget that will be used to measure and monitor cost performance on the projectIt is developed by summing estimated costs by period and is usually displayed in the form of an S-curveLarger projects may have multiple cost baselines to measure different aspects of cost performance. 24Cost Control5th of 8 controlling phase process Project cost control includemonitoring cost performanceensuring that only appropriate project changes are included in a revised cost baselineinforming project stakeholders of authorized changes to the project that will affect costsDuring this process, project manager try to determine what facts impact, cost, how these factors can be influenced, whether these changes are beneficial to the project or product. Earned value management (EVM) is an important tool for cost controlChapter 625Inputs to Cost ControlCost baselineincludes a time-phased budget used to measure and monitor cost performance on the projectThe cost baseline is usually shown as cost-by-period and can be charted in the form of an S-curve.Performance reportsprovide information on cost performance, such as which budgets have been met and which have not.Change requeststake many forms: oral or written, direct or indirect, external or internally initiated, and legally mandated or optional.Cost management plandescribes managing cost variances26Tools & techniquesCost change control systemdefines the procedures by which the cost baseline may be changedIt includes the paperwork, tracking systems, and approval levels necessary for authorizing changes.Performance measurement techniqueshelp to assess the magnitude or any variation that do occur. Earned value analysis is especially useful for cost controlEarned value management (EVM) is the tools commonly used to determine variance causes and deciding if the variance requires corrective action.Additional planningprospective changes may require new or revised cost estimates or analysis of alternative approaches.Other general computerized toolsproject management software or spreadsheets that track planned versus actual costs or that forecast the effects of cost changes.27Earned Value Management (EVM)EVM is a project performance measurement technique that integrates scope, time, and cost dataGiven a baseline (original plan plus approved changes), you can determine how well the project is meeting its goalsYou must enter actual information periodically to use EVM. The following shows a sample form for collecting informationChapter 628Earned Value Management TermsThe planned value (PV), formerly called the budgeted cost of work scheduled (BCWS), also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given periodActual cost (AC), formerly called actual cost of work performed (ACWP), is the total of direct and indirect costs incurred in accomplishing work on an activity during a given periodThe earned value (EV), formerly called the budgeted cost of work performed (BCWP), is the percentage of work actually completed multiplied by the planned valueChapter 629Earned Value Calculations for One Activity After Week One30Earned Value FormulasTo estimate what it will cost to complete a project or how long it will take based on performance to date, divide the budgeted cost or time by the appropriate index.Chapter 631Rules of Thumb for EVA NumbersNegative numbers for cost variance (CV) and schedule variance (SV) indicate problems in those areas. The project is costing more than plannedThe project is taking longer than plannedCPI and SPI less than 100% indicate problemsThe % of the project is over budget in costThe % of the project is behind schedule in timeChapter 632Earned Value Calculations for a One-Year Project After Five MonthsExcel file33Earned Value Chart for Project After Five MonthsExcel file34Using Software to Assist in Cost ManagementSpreadsheets are a common tool for resource planning, cost estimating, cost budgeting, and cost controlMany companies use more sophisticated and centralized financial applications software for cost informationProject management software has many cost-related featuresChapter 635Outputs from Cost ControlRevised cost estimatesupdate of the project cost estimates.Budget updateschanges to an approval cost baseline. The numbers are generally revised only in response to scope changes.Cost variance may be so severe that re-baselining is needed in order to provide a realistic measure of performance.Corrective actionanything done to bring expected future project performance into line with the project plan.36Outputs from Cost Control (2)Estimate at completion (EAC)A forecast of total project costs based on project performance. The most common variations areactual cost to date plus the remaining project budget modified by a performance factoractual costs to date plus a new estimate for all remaining worksactual cost to date plus the remaining budget.Project closeoutprocesses and procedures for closing or canceling the project.Lessons learneddocument the causes of variances, reasons behind the corrective action chosen, and other lessons learned.37SummaryImportance of Project Cost ManagementProblem: cost overrun and cannot meet cost goalsCosts are measured in monetary unitsProject Cost ManagementResource planning: determining what resources and quantities of them should be usedCost estimating: developing an estimate of the costs and resources needed to complete a projectCost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performanceCost control: controlling changes to the project budgetResource Planning considerationdifficulty, uniqueness, track record, people, equipment and materials 38Summary (2)Types of cost estimateROM, Budgetary and definitiveBasic tools and techniques in cost estimationtop-down, bottom-up, parametric: CocomoCost budget involves allocating the project cost estimate to individual work items and providing a cost baselineProject cost control includesmonitoring cost performanceensuring that only appropriate project changes are included in a revised cost baselineinforming project stakeholders of authorized changes to the project that will affect costsEarned value management is an important tool for cost control39