Cost Unit part 2. BSBPMG504A Manage project cost

Diploma Project Management Captain Cook College

Sharon Boyle

Presentation – Revision of last week’s terms Cost management techniques – some detail

as requested Time to catch up and finalise LMS Morning Tea Balance of cost unit

◦ SB Cost Unit started last week & finish tomorrow Everyone continues with Cost

◦ Today & Friday – completing cost Friday 23 August

Lesson Plan 26 November

1. EVM an overview2. Basic Elements3. Cost Variances4. Schedule Variances

The details of EVM

tracking tools upon which to base forecasts Integrates scope, schedule & cost Answers many questions stakeholders need Performance can be shown as

◦ Past◦ Current ◦ Predictive

Promises to reduce over-runs

Earned Value Management both Time & Cost

financial analysis specialty from United States Government programs in the 1960s,

Now significant branch of project management.

In the late 1980s and early 1990s, EVM emerged as a project management methodology

EVM has become an essential part of every project tracking.

Context

http://www.youtube.com/watch?v=7WsfuvHegxE&feature=related

A re-fresher from Dave

Planned Value ◦ (PV) = PV or Budgeted cost of work scheduled

BCWS = Hourly Rate * Total Hours Planned or Scheduled

Actual Cost ◦ (AC) = hourly rate x total hours spent

Earned Value ◦ (EV)= Baselined costs x % complete

% Completed Planned◦ % Completed planning =PV/BAC

Basic Elements

Cost Variance (CV) indicates how much over or under budget the project is.

Why is under cost a problem? (CV) = Earned Value (EV) – Actual Cost (AC)

Also CV = BCWP – ACWP

◦ Positive Cost Variance Indicates the project is under budget

◦ Negative Cost Variance Indicates the project is over budget

Cost Variances

Cost Variance % - how much over or under budget the project is in terms of percentage

CV% = CV/EV◦ Or

CV% = CV/Budgeted Cost of Work

Cost Variances %

CPI = EV/AC

Shows how efficient we are Above 1 good efficiency Below 1 project not using resources

efficiently

Cost Performance Indicator CPI

TCPI = Total Budget – EV/Total Budget – AC

Another measure of efficiency –◦ The correct people do the correct things within a

clear process◦ Above 1 utilization must be stringent◦ Below 1 lenient.

To complete Cost performance indicator (TCCPI)

 Schedule Variance (SV) = Earned Value (EV) - Planned Value (PV)

How much is yet to be completed as per schedule

+ve Schedule variances = we are ahead of time

-ve Schedule variance = we are behind schedule

Then same % as for Costs

Schedule Variance

Budget at Completion = total budget

BAC = Baselined effort hours x hourly rate

Estimate to complete – just what it says. Estimate hours required x hourly rate

A few more

Morning Tea

Cost Unit 1. Assist with the

development of the project budget

2. Monitor project costs 3. Contribute to cost

finalisation process

Determine ◦ estimated costs for tasks & activities and ◦ communicate these costs to others for inclusion in project

budget Map costs against

◦ duration /effort & ◦ resources allocated, and ◦ communicate to project manager for inclusion

project plan, budget expenditure flow

Contribute to◦ development of cost management strategies & processes, ◦ financial authorisation within delegated authority

1. Assist with the development of the project budget

Monitor income and expenditure against◦ agreed project plan ◦ budgets to facilitate cost management throughout

the project life cycle Use established cost management methods,

techniques & tools Implement & monitor

◦ agreed actions ◦ report progress

2. Monitor project costs

Project records◦ cost management lessons learned◦ cost verification and validation documentation◦ input to cost management plans◦ invoice and payment records◦ lists of potential costs◦ project and/or organisation files and records◦ reports to relevant stakeholders

New &/or important terms

Provide assistance in the finalisation and transfer of financial assets, liabilities and records to the client or relevant operational support agency

Provide assistance in the review of project outcomes by use of project records, to determine the effectiveness of initial and subsequent cost management strategies and processes

  Report cost management issues and responses to

project/program manager for application in future projects

Contribute to cost finalisation process

Assessment Item 1 Cost Estimating Use template for Fred’s shed budget

Completed cost estimates

Assessment Item 2 Finalisation & handover report Documents

Completed templates

Assessment Items