1. Elmar Meyer Pierre Janse van Vuuren Nathi Ndlovu Ferdinand Chauke Moses Fakude 9/15/20101PMP Exam Prep.

2. Process Chart – Cost Management INITIATIONPLANNINGEXCECUTING MONITORING & CONTROLLING CLOSING Estimate Cost Determine Budget Control Costs 9/15/20102PMP Exam Prep.

3. 9/15/2010PMP Exam Prep.3 INITIATIONPLANNINGEXCECUTING MONITORING & CONTROLLING CLOSING Determine how you will do planning – part of all management plans Estimate time and cost Develop Budget Determine all rolls and responsibilities Go back to - iterations Finalize the “how to execute and control” parts of all management plans Develop final PM plan and performance measurement baseline that are realistic Take action to control the project Measure performance against the performance measurement baseline Measure performance against other metrics determined by the Project Manager Determine the variances and if they warrant a change request Influence the factors that cause changes Request Changes Create forecast

4. Cost Management Plan Includes: Specifications of Estimates Level of Accuracy Reporting Formats Rules for measuring Cost Performance Whether cost include both direct & indirect costs Control Thresholds 9/15/20104PMP Exam Prep.

5. Cost Management Concepts 1 of 3 Life Cycle Costing Looking at the cost of the whole life of the project, not just the cost of the project. Explain: If you reduce the quality of a project in order to save project costs, but due to the reduction in quality, the maintenance of the project increases more than the saving …. This is not good planning. 9/15/2010PMP Exam Prep.5

6. Cost Management Concepts 2 of 3 Value Analysis Also referred to as Value Engineering It involves finding a more cost effective way of producing the same product, without compromising the scope or quality. 9/15/2010PMP Exam Prep.6

7. Cost Management Concepts 3 of 3 Cost Risk Based on the risk of procurement contracts. Example: Q: Who has the cost risk in a fixed price contract? A: The seller. Definition: Seller = Contractor, and or, sub-contractor to the project Buyer = Employer 9/15/2010PMP Exam Prep.7

8. Estimate Costs The process where the estimates for each activity are made in order to determine the budget. Cost of quality efforts Cost of risk efforts Cost of the PM’s time Cost of Project Management activities Direct costs Indirect costs Profit Overhead costs (P&G’s) 9/15/2010PMP Exam Prep.8

9. Types of Costs Variable Costs This cost change with the a change in the amount of work Fixed Costs This cost will not change, eg. Setup and rental cost Direct Costs Directly related to the work on the project, ie. Travel, team wages, materials Indirect Costs These are overhead items, ie taxes and benifits 9/15/2010PMP Exam Prep.9

10. Inputs to Estimating Costs Scope Baseline Project Schedule HR Plan Risk Register Organizational Process Assets (Lessons learned, Hist.) Company Culture Project Management Costs 9/15/2010PMP Exam Prep.10

11. How is Estimating Done? 1 of 2 It’s a “Bottom up” process Start with each work package, and combine, until total figure. This process requires an accurate WBS, and schedule. Advantages. More accurate Gains buy-in from the team Based on a detailed analysis Provides a basis for monitoring and controlling Disadvantage Takes time Tendency for the team to pad estimates unless taught about reserves Requires that the project be defined and well understood before work starts. 9/15/2010PMP Exam Prep.11

12. How is Estimating Done? 2 of 2 Analogous Estimate Advantages Less costly to create Give the PM an idea of the level of Management’s expatiation Overall project costs will be capped Disadvantages Requires considerable experience to do it well Infighting to gain the biggest piece of the budget without being able to justify the need Extremely difficult for projects with uncertainties Does not take into account the differences between projects 9/15/2010PMP Exam Prep.12

13. Contributions to Creation of Estimates Project Management Software Combination of various software packages Determining Resource Cost Rates Gathering of all recourse costs for specific project Reserve Analysis Allowing contingencies and Risk allowances Cost of Quality Cost of work for quality planning 9/15/2010PMP Exam Prep.13

14. Accuracy of Estimates ROM Rough order of magnitude estimate +/- 50% (Initiation Phase) Budget Range of -10% to 25% accuracy (Planning phase) Definitive Estimate More accurate ( Monitoring Phase) 9/15/2010PMP Exam Prep.14

15. Thank You 9/15/2010PMP Exam Prep.15