pmp preparation - 07 cost management

PMP Lectures Prepared By: Eng. Mohamed ElSaadany

0. In t roduc t ion

1. P lan Cos t Management

2. Es t imate Cos ts

3. Determine Budge t

4. Cont ro l Cos ts

Lecture 07 : Project Cost Management (1/18)Contents


Lecture 07 : Project Cost Management (2/18)Introduction

Direct vs. Indirect Cost

1. Direct Cost: Directly attributable to project work. تتأثر مباشرة بأعمال المشروع

2. Indirect cost: Such as overhead, benefits, and costs incurred for more than

project like equipments. مثل النفقات العامة و االرباح و التكاليف المشتركة بين

المشاريع

Fixed vs. Variable Cost

3. Fixed cost: Costs that are not changed with production such as setup cost

and rental cost تكاليف ال تتغير مع االنتاج

4. Variable cost: Costs that are changed with production such as material and

labors. التكاليف التي تتغير مع االنتاج مثل تكاليف العمالة و المواد الخام


Lecture 07 : Project Cost Management (3/18)Introduction

Definitions :

Life Cycle Cost : Looking at the whole life cost.

(Ex: Don’t pay less for lower quality then pay more for maintenance.

تكاليف دورة حياة المنتج : يتم دراسة التكاليف في جميع مراحل عمر المنتج

مثال : ال تقوم بالتوفير باختيار معايير جودة ضعيفة ثم تدفع كثيراً في مراحل التشغيل

و الصيانة

Value Analysis (value engineering) : Finding a less costly way to perform

the same work. تحليل القيمة : عبارة عن ايجاد طرق اقل تكلفة النجاز نفس

األعمال

Lecture 07 : Project Cost Management (4/18)1.Plan Cost Management (Planning)


C o s t M a n a g e m e n t

7.1 Plan Cost Management

Inputs : Project Management Plan Project Charter Enterprise Environmental Factors Organizational Process Assets

Tools and Techniques : Expert Judgment Analytical Techniques Meetings

Outputs : Cost Management Plan


Analytical Techniques• Strategic options to fund the project

o Self-funding,o Funding with equity, (Ex: Stocks) التمويل من خالل المشاركة كما باألسهمo Funding with debt (Ex: Bonds) التمويل من خالل االقتراض كما بالسندات

• Project resources Financeo Making,o Purchasing,o Renting (Short Term),o Leasing (Long Term).

• Financial analysis techniques:o payback period, o Return on investment (value), o Internal rate of return, o Net present value.


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Cost Management Plan : خطة إدارة التكاليف• Establish the criteria for planning, structuring, estimating, budgeting, and

control project cost. تأسيس معايير تخطيط و هيكلة و تقدير و موازنة و مراقبةتكاليف المشروع

• Cost management plan may includes: يمكن ان تحتوي الخطة على1. Units of measure ( ex: staff hours) وحدات القياس2. Level of Precision (rounding up or down, ex: $125.3 $125)

3. Level of Accuracy (ex: ± 5%)

4. Organizational Links (with accounting systems)

5. Control thresholds ( level at which an action needs to be taken)

6. Rules of performance measurement (Procedures)

7. Reporting formats


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Lecture 07 : Project Cost Management (7/18)2.Estimate Costs (Planning)



7 . 2 E s t i m a t e C o s t sInputs :

Cost Management Plan ■ Scope Baseline Human Resource Management Plan ■ Project Schedule Risk Register ■ Enterprise Environmental

Factors Organizational Process Assets

Tools and Techniques : Expert Judgment ■ Analogous Estimating Parametric Estimating ■ Bottom-Up Estimating Three-Point Estimates ■ Reserve Analysis Cost of Quality ■ Project Management

Software Group Decision-Making Techniques ■ Vendor Bid Analysis

Outputs : Activity Cost Estimates Basis of Estimates Project Document Updates



Cost of Quality:• All costs incurred in preventing nonconformance, apprising, or rework. This

will be illustrated later in Quality Management.

Vendor Bid Analysis:• Analysis of cost estimate based on responsive bids from qualified vendors.

Cost Estimates:

Costs are estimated for all resources such as:

• Direct Cost (Labor, materials, equipment, services, facilities, IT)

• Cost of financing (interest), inflation allowance, exchange rates.

• Contingency reserve.

• Insurance fees.

• Taxes

• Overhead (Site overhead and main office)

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Basis of Estimates :• Supporting documentation which provides understanding of how the cost

estimate was derived.

• This may includes:

• Assumptions.

• Constraints.

• Ranges of accuracy (ex:± 5%).

• Confidence level of the final cost estimate.

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Lecture 07 : Project Cost Management (10/18)3.Determine Budget (Planning)


C o s t M a n a g e m e n t7 . 3 D e t e r m i n e B u d g e t

Inputs : Cost Management Plan ■ Scope Baseline Activity Cost Estimates ■ Basis of Estimates Project Schedule ■ Resource Calendars Risk Register ■ Agreements Organizational Process Assets

Tools and Techniques : Cost Aggregation Reserve Analysis Expert Judgment Historical Relationships Funding Limit Reconciliation توفيق

Outputs : Cost Baseline Project Funding Requirements Project Document Updates



Cost Aggregation :• Cost Estimates are aggregated within activities and rolled up to work

package then rolled up to control accounts then rolled up to entire project.

تجميع التكاليف من مستوى األنشطة الى حزم العمل ثم الى حسابات التحكم ثم الى : Reserve Analysisالمشروع بالكامل

1. Contingency Reserve : Allowances for

unplanned changes result from identified risks.

2. Management Reserve : Budgets reserved for

unplanned changes to scope and cost.

Cost estimates

Contingency Reserve

Management Reserve

Cost

Bud

get

Cost

Bas

elin

e

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Historical Relationships:• Historical Relationships involve the use of project characteristics

(parameters) to develop mathematical models to predict total project costs.

• This results in parametric estimates or analogous estimates.

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Funding Limit Reconciliation : المعالجة طبقا لقيود التمويل• Sometimes funds are not available when needed and you have to

reschedule the activities. احيانا ال يوجد تمويل مما يضطرك الي اعادة جدولةاالنشطة

• Expenditures should be reconciled with any funding limitsال بد من معالجة و توفيق خطة االنفاق طبقا ألي قيود موجودة على التمويل

• Example : Funds for the project will be available on two batches : $50 millions today and $40 millions in the beginning of the next year.

Cost Baseline : خط أساس التكلفة• The planned costs over project time. It’s used to

control cost performance in the project. فUالتكالي المخطط انفاقها عبر زمن المشروع

Project Funding Requirements : متطلبات تمويلالمشروع

• It can be derived from cost baseline. Funding often occurs in incremental amounts.

يمكن استنتاجها من خط أساس التكلفة و غالبا ما تكون على دفعات

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Lecture 07 : Project Cost Management (13/18)4.Control Costs (M/C)



7 . 4 C o n t r o l C o s t sInputs :

Project Management Plan Project Funding Requirements Work Performance Information Data Organizational Process Assets

Tools and Techniques : Earned Value Management Forecasting To Complete Performance Index (TCPI) Performance Reviews Project Management Software Reserve Analysis

Outputs : Work Performance Information ■ Cost Forecasts Project Management Plan Updates ■ Change Requests Organizational Process Assets Updates ■ Project Document Updates



Earned Value Management : ادارة القيمة المكتسبة• Planned Value (PV) = Budgeted cost for work scheduled (BCWS)

قيمة األعمال المخطط تنفيذها عند نقطة زمنية محددة• Earned value (EV) = Budgeted cost for work performed (BCWP)

القيمة المكتسبة من تنفيذ اعمال فعلية عند نقطة زمنية محددة• Actual Cost (AC) = Actual cost for work performed (ACWP)

التكاليف الفعلية لالعمال التي تم تنفيذها• Schedule Variance (SV) = EV – PV انحراف )تباين( الجدول الزمني • Cost Variance (CV) = EV – AC انحراف التكلفة

• Schedule Performance Index (SPI) = EV / PV مؤشر أداء الجدول الزمني • Cost Performance Index (CPI) = EV / AC مؤشر أداء التكلفة

Behind Schedule عن متأخرالجدول

SV < 0

On Schedule دولUالج SV = 0 مع

Ahead of Schedule الجدول سابق SV > 0

Over Budget الميزانية تعدى CV < 0

On Budget الميزانية مع CV = 0

Under Budget نطاق داخل الميزانية

CV > 0

Behind Schedule SPI < 1

On Schedule SPI = 1

Ahead of Schedule SPI > 1

Over Budget الميزانية تعدى CPI < 1

On Budget الميزانية مع CPI = 1

Under Budget نطاق داخل الميزانية

CPI > 1

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Example :

PV (BCWS) =1000x120 = 120,000.00EV (BCWP) =1000x130 = 130,000.00AC (ACWP) =1200*130 = 156,000.00

Variance :SV = EV - PV = 130'000 - 120'000 = 10'000 (Ahead of Schedule)CV = EV - AC = 130'000 - 156'000 = -26'000 (Over Budget)

Performance IndexSPI = EV / PV = 130'000 / 120'000 = 1.083 (Ahead of Schedule)CVI = EV / AC = 130'000 / 156'000 = 0.833 (Over Budget)

Cost/Unit Quantity

Budget 1000 120

Actual 1200 130



Time

Cost



Forecasting : التوقع من خالل معايير• Estimate at Completion (EAC) = Actual Cost+ Estimate to Complete (ETC).

القيمة المتوقعة في نهاية المشروع = القيمة الفعلية حتى اآلن + المتوقع النهاء المشروع

• There are various methods to calculate the Estimate to Complete (ETC)يوجد عدة طرق لحساب القيمة المتوقعة النهاء المشروع

1- At the budgeted rate : EAC = AC + (BAC – EV)

2- Considering CPI : EAC = AC + [ (BAC – EV) / CPI ] = AC + BAC/CPI – EV/CPI = AC + BAC/CPI – AC = BAC / CPI

3- Considering CPI and SPI : EAC = AC + [ (BAC – EV) / (CPI x SPI) ]

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To Complete Performance Index (TCPI) : مؤشر اآلداء للقيمة المطلوبةإلكمال المشروع

• It’s the cost performance that must be achieved on the remaining work to meet a specified goal like BAC or EAC االداء المالي المطلوب تحقيقه فيالفترة القادمة

• It represents the ratio between remaining works and remaining funds. تمثل النسبة بين قيمة االعمال المتبقية و قيمة التمويل المتبقي

• TCPI = (BAC-EV) / (BAC – AC)Or TCPI = (BAC-EV) / (EAC – AC) “If the BAC is no longer valid”• Ex :

BAC = 500’000.00 , EV = 200’000.00, AC= 250’000.00TCPI = (300’000.00 ) / (250’000.00) = 1.2

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Performance Reviews :• Variance at completion (VAC) = BAC – EAC• Trend Analysis: Graphical analysis examines project performance over time.• EVM

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pmp preparation - 07 cost management

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