1. Project Cost Management
ASHIMA WADHWA

2. 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)

3. 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.

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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)

13. 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

14. 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)

15. 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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