1. The Project Schedule and Budget
Chapter 7
Copyright 2012
John Wiley & Sons, Inc.

2. Critical Chain Project Management (CCPM)
Introduced in 1997 in a book called Critical Chain by Eliyahu Goldratt
Based on his previous work called the Theory of Constraints
CCPM is based on the idea that people often inflate or add cushioning to their estimates to create a form of “safety” to compensate for uncertainty or risk because …
Your work is dependent upon the work of someone else, and you believe that starting your work will be delayed
Your pessimism from previous experience where things did not go as planned
Your belief that the project sponsor or customer will cut your project schedule or budget so you inflate your estimates to guard against this cut

3. CCPM Assumptions
Begins by asking each person or team working on a task to provide an estimate that would have a 50% chance of being completed as planned Instead of adding safety to each task, put that safety in the form of buffers where it is needed most

4. The Critical Chain Project Schedule

5. Critical Chain Project Management

6. The Importance of Project Cost Management
IT projects have a poor track record for meeting budget goals A 2011 Harvard Business Review study reported an average cost overrun of 27 percent. The most important finding was the discovery of a large number of gigantic overages or “black swans”

7. Examples of how not to mange costs
The U.S. government (e.g. IRS)
The United Kingdom’s National Health Service IT

8. Project Cost Management Processes
Process Group
Cost Management Process
Major
Output
Planning
CP1: Planning Cost Mgmt
Cost Management Plan
CP2: Estimating Costs
Activity Cost Estimates
CP3: Determining the Budget
Cost Performance Baseline
Monitoring and Controlling
MC1: Controlling Costs
Work Perf. Measurements
Budget Forecasts

9. What is Cost and Project Cost Management?

10. Project Cost Management Processes
Scope Baseline
Schedule Baseline
Estimate bases
Project Funding Req.
Determine Budget
Control Costs
Estimate Costs
Activity Cost Estimates
Cost Baseline

11. PMBOK® Project Cost Management
Estimate Costs
Focuses on the processes to estimate the monetary resources needed to complete the project work or activities.
Determine Budget
Aggregating the individual cost for each of the project activities or work package components to determine the cost baseline or overall project budget.
Control Costs
Updating the project’s status while monitoring the project’s budget and managing any changes to the baseline plan.

12. Developing the Project Budget

13. Types of Costs and Benefits

14. Other Costs

15. Planning Cost Management
The project team uses expert judgment, analytical techniques, and meetings to develop the cost management plan
A cost management plan includes:
Level of accuracy and units of measure
Organizational procedure links
Control thresholds
Rules of performance measurement
Reporting formats
Process descriptions

16. Determining the Budget
Cost budgeting involves allocating the project cost estimate to individual work items over time The WBS is a required input to the cost budgeting process since it defines the work items Reserve analysis must occur

17. Figure 7-4. Surveyor Pro Project Cost Baseline

18. Project Management Software Tools

19. Finalizing the Project Schedule and Budget

20. Copyright 2012 John Wiley & Sons, Inc. All rights reserved
Copyright 2012 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.