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