Project Cost Management ASHIMA WADHWA

Project Cost Management Ensure that the project is completed within budget Concerned with cost of resources needed to complete activities; consider effect of project decisions on cost of using product “life-cycle costing” Most prospective financial impact of using the product is outside the project scope Consider information needs of stakeholders, controllable and uncontrollable costs (budget separately for reward and recognition systems)

Project Cost Management: Points to be taken care of- Estimating should be based on WBS to improve accuracy Estimating should be done by the person performing the work Having historical records is key to improving estimates Costs (schedule, scope, resources) should be managed to estimates A cost (schedule, scope, baseline) should be kept and not changed Plans should be revised as necessary during completion of work Corrective action should be taken when cost problems (schedule, scope and resources) occur.

Project Cost Management : Process Resource Planning: Determining what physical resources and quantities are needed to perform work Inputs to Resource Planning: Work Breakdown Structure Historical Information Scope Statement – justification & objectives Resource Pool Description – what resources are potentially available for resource planning Organizational Policies – staffing, procurement

Project Cost Management: Process Inputs to Resource Planning: Work Breakdown Structure Network Diagram Schedule Risks Historical Information Scope Statement – justification & objectives Resource Pool Description – what resources are potentially available for resource planning Organizational Policies – staffing, procurement

Resource Planning Resource Planning Tools & Techniques Expert Judgment Alternatives Identification Resource Planning Outputs: Resource Requirements – what type & how many resources are needed for each activity in the Work Breakdown Structure

Cost Estimation Cost Estimating: Develop approximate costs of resources Distinguish estimating from pricing Estimating – likely amount Pricing – business decision Identify alternatives and consider realigning costs in phases to their expected savings

Cost Estimation Cost Estimating Inputs: Work Breakdown Structure Resource Requirements Resource Rates (if known) Activity Duration Estimates Historical Information – (project files, commercial cost databases, team knowledge Chart Of Accounts – coding structure for accounting; general ledger reporting

Tools and Techniques Cost Estimating Tools & Techniques Analogous Estimating – “top down”; using actual costs from previous project as basis for estimate Reliable when previous projects are similar and individuals have expertise – form of expert judgment Parametric Modeling – uses project characteristics in mathematical models to predict costs (e.g.building houses) Reliable when historical information is accurate, parameters are quantifiable, and model is scalable 2 types: Regression analysis, Learning Curve Bottom Up Estimating – rolling up individual activities into project total – smaller work activities have more accuracy - Computerized tools – spreadsheets, software

Pro’s and con’s : Analogous Estimating Quick - Less Accurate Tasks don’t need to be identified – Estimates prepared with little detail and understanding of project Less costly – Requires considerable experience to do well Gives PM idea of management expectations – Infighting at high levels of organization Overall project costs are capped – Difficult for projects with uncertainty

Pro’s and Con’s :Bottom Up Bottom Up Estimating More Accurate – Takes time and expense Gains buy-in from the team – Tendency for team to pad estimates Based on detailed analysis of project – Requires that project be defined and understood Provides a basis for monitoring and control – Team infighting to get biggest piece of pie

COCOMO Stands for COnstructive COst MOdel Introduced by Barry Boehm in 1981 in his book “Software Engineering Economics” Became one of the well-known and widely-used estimation models in the industry It has evolved into a more comprehensive estimation model called COCOMO II COCOMO II is actually a hierarchy of three estimation models As with all estimation models, it requires sizing information and accepts it in three forms: object points, function points, and lines of source code (More on next slide)

COCOMO Models Application composition model - Used during the early stages of software engineering when the following are important Prototyping of user interfaces Consideration of software and system interaction Assessment of performance Evaluation of technology maturity Early design stage model – Used once requirements have been stabilized and basic software architecture has been established Post-architecture stage model – Used during the construction of the software

COCOMO Cost Drivers Personnel Factors Product Factors Applications experience Programming language experience Virtual machine experience Personnel capability Personnel experience Personnel continuity Platform experience Language and tool experience Product Factors Required software reliability Database size Software product complexity Required reusability Documentation match to life cycle needs Product reliability and complexity (More on next slide)

COCOMO Cost Drivers (continued) Platform Factors Execution time constraint Main storage constraint Computer turn-around time Virtual machine volatility Platform volatility Platform difficulty Project Factors Use of software tools Use of modern programming practices Required development schedule Classified security application Multi-site development Requirements volatility

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