Cost Unit BSBPMG504A Manage

project cost part 2. day 1 Diploma Project Management

Captain Cook CollegeSharon Boyle

Presentation Discussion revision through discussion around Assessment Items

◦ Assessment items for Cost Unit including structure for CMP◦ Confirmed & agreed date for Project management meeting

Morning Tea◦ Earned Value Analysis ◦ Variations & Closeouts

Work on either cost management plan or LMS questionsLunch Discuss answers for Activities 1 & 3 – leave Written/Oral to

next week Continue working on LMS

◦ Tomorrow◦ Project Meeting

Lesson plan 24 January

No. 1.  Prepare a Cost management plan for Fred’s Shed – Mr Jones job and

include a detailed project budget.

No 2.  Analyse scenario to be provided & insert into baselined budget. Note

variances

No 3.  Provide progress report - this will include the Variance analysis from

Scope & Time Units.

No 4. Attend a Project Meeting where progress will be presented based on

progress reports prepared in Scope, Time & cost units. Each student is required to attend the meeting, play the role

requested and prepare a set of minutes.

Cost unit assessment items

Prepare a Cost management plan for Fred’s Shed – Mr Jones job and include a detailed project budget.

What is the purpose of a cost management plan?

Major components? Use scaled down template provided

Assessment Item 1. – workshopped for discussion & clarification

TABLE OF CONTENTS◦ Introduction ◦ Cost Management Approach ◦ Measuring Project Costs ◦ Reporting Format ◦ Cost Variance Response Process ◦ Cost Change Control Process ◦ Project Budget

Structure of cost management plan

A brief scenario will be provided which impacts on time & cost.

Update your budget in Assessment Item 1. Describe the impacts on the budget. Use the template but just the appropriate

sections

Assessment Item 2. – workshopped for discussion & clarification

Provide progress report - this will include the Variance analysis from Scope & Time Units.

Use the template provided

Assessment No 4.

 Provide progress report

Each student is required to attend the meeting, play the role requested and prepare a set of minutes.

Date 25 January Agenda will be prepared & sent out by Jamie Everyone required to prepare minutes of

meeting

Assessment Item for Cost & Time

Project Manager - Jamie Assistant PM - Kevin Cost controller – Jerzy Scheduler - Chas Client – Mr Jones - Dennis CEO – Fred - Sylvester Note taker - Winni

Roles agreed last week

Remember◦ LMS – don’t bother with Activity 2. ◦ Written/Oral for next week.

Cost management plan –◦ use structure provided or do up your own ◦ Must include budget for Fred’s shed◦ Consider EVA after next week’s lectures & video

LMS questions or Cost management plan preparation

Morning Tea

1. Determine project costs 2. Monitor and control project costs 3. Conduct financial completion activities

Three basic elements within the Cost unit

Overview from PMBOK page 167

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

The details of EVM

Different ways of presenting information◦ Numbers eg

◦ Graphs

◦ Analysis & indices

Reporting & Monitoring

S-curve – ◦ expenditure &

income ◦ throughout

lifecycle

Earned Value Theory

Established Cost methods

Earned Value Management

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

Earned Value with Dave Litten

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

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

Activity 1.

Activity 3.

LMS

Lunch

Conduct appropriate close out activities◦ Has everyone been paid?◦ What about the variations? ◦ Where do we stand?◦ Detailed records must be kept◦ Any lessons learnt?

3. Conduct financial completion activities