1. 4-1 Budgeting the Project Budget

2. Outline: 4-2 Homework #17, #18, #19 (below) For #19 use the #18 data but add to it the following: -Vendor costs of either $30,000, $50,000, or $80,000 with probabilities of 0.20, 0.50, and 0.30 respectively -You will need to set up a custom distribution to do this -What is the EV for the vendor costs? -What is the base case for the new total project engineering costs? -Using simulation, find the probability total costs exceed $130,000?  Overview  Approaches for gather data  Budgeting & Estimating costs  Budget uncertainty and risk management  CB Homework

3. 4-3

4. 4-4

5. 4-5  Budgets are plans for allocating organizational resources to project activities. forecasting required resources, quantities needed, when needed, and costs  Budgets help tie project to overall organizational objectives.  Budgets can be used as tool by upper management to monitor and guide projects.

6. 4-6

7. 4-7 Analogous estimation Parametric estimation It will take 20 hours of a programmer’s time to write this module. The historical average rate for this type of programmer has been $100/hour. Therefore, the module cost will be $2,000. Bottom-up estimation

8. 4-8 Estimate Uncertainty

9. 4-9

10. 4-10 Simulation Technique for Uncertainty in Project Costs

11. 4-11 What is the probability the project comes in at $5000 or less? Simulation Technique for Uncertainty in Project Costs

12. 4-12 Simulation Technique for Uncertainty in Project Costs

13. 4-13 Simulation Technique for Uncertainty in Project Costs

14. 4-14 Materials Very LowLowMediumHigh Probability0.1 0.50.3 Alternatives EV In-house12,50013,80015,20022,00016830 Outsource15,000 15000 Combo11,20012,10014,00016,80014370

15. 4-15 BAC EV or BCWP – value of the actually performed work for a given period of time. AC or ACWP PV or BCWS Example: Project is the construction of a 16-mile road. The work is uniformly distributed over 12 weeks. Total budgeted amount is $600,000. At the end of the first 4 weeks, $125,000 has been spent, and 4 miles of road completed. $ Work Performed Schedule/Time

16. 4-16

17. 4-17

18. 4-18 Why did FoxMeyer initiate the Delta III project? What was the solution? What was FoxMeyer implementing as part of the project? What were the problems and issues? What can we learn about managing projects?