AY0809 October Semester

IT Project Management

Tutorial 6:Planning Processes – Project Cost Management

Objectives:1. Describe cost time management planning tasks 2. Discuss tools and techniques for project cost management planning

Students are encouraged to prepare their draft answer before class, as this will help them to discuss the questions and answers during the tutorial session.

1. Using the template below, describe the key planning processes and outputs of these processes for the project management knowledge areas indicated.

KNOWLEDGE AREA

PLANNING OUTPUT

Project Cost Management

Cost estimating

Cost budgeting

Activity cost estimates

Cost baseline

2. How is estimating an IT project different from estimating a construction project? What make estimating an IT project challenging?

Trying to estimate something that is logical rather than physical (building)

Specific requirements in terms of features and functionality are generally not define until later in the project – design phase (which comes after the requirements)

Complexity of the code and technical challenges of implementation those features and functionality are not know upfront (usually surfaces in the construction/development phase)

Many different skills are required on an IT project – database specialist, security, programming, telecommunications and networking, web, operating systems, project management – estimation for each area/specialty is different

3. Complete the table below.

TOP DOWN ESTIMATION BOTTOM UP ESTIMATION

Description Also known as analogous estimates use the actually cost of a previous, similar project as the basis for estimating the cost of the

Estimating individual work items or activities and summing them to get a project total (sometimes called activity based

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AY0809 October Semester

project costing)

Advantages Less costly (need not start from scratch when estimating)

More effective approach to cost and schedule analysis – project managers are forced to examine risks more closely so that the budget or the schedule can be achieved

More accurate – the size of the individual work items and experience of the estimators drive the accuracy of the estimates

Disadvantages

Requires a good deal of expert judgment

Less accurate (based on something which is similar

Time consuming and expensive

4. What are typical problems with IT cost estimates?

Estimates are done too quickly – usually estimates are called for even before clear system requirements have been produced. Estimates done early in the project lifecycle are usually ballpark figures may be much lower than estimates done when requirements are more defined.

Lack of estimating experience – people who are asked to estimate often do not have much experience with cost estimation especially for large project. In many instance these is not enough accurate and reliable project data available for reuse unless organizations make a conscious effort to keep a history of project data.

Human beings are biased towards under estimations – senior IT professionals make estimates based on their own abilities and forget that many junior people will be working in the project. Estimators often forget to cater for extra costs needed for integration and testing especially for large projects.

Manage desires accuracy – management might ask for an estimate but really wants a more accurate number to help them create a bid to win a major contract or to get internal funding.

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