Chapter 10 | Course Paper

CONTEMPORARYPROJECTMANAGEMENT,4E

TimothyJ.Kloppenborg

VittalAnantatmula

KathrynN.Wells

1

BudgetingProjects

Chapter10

2

Chapter10CoreObjectives:

•Defineprojectcostterms&tellhoweachisusedinestimatingprojectcost.

•Compareandcontrastanalogous,parametric,&bottom‐upmethodsofestimating

cost.

•Createatime‐phased,bottom‐upbudgetforaproject.

3

Chapter10TechnicalObjectives:

•Showbothsummary&bottom‐upprojectbudgetinformationwithcumulativecosts,

usingMSProject2016.

4

Chapter10BehavioralObjectives:

•Describeissuesinprojectcostestimatingandhowtodealwitheach.

5

MethodsofEstimatingCosts

TimothyJ.Kloppenborg

“Iworkedforthesamecompanyinbothcities….Both[methods]

madesensewheretheywereused.InDenver,ifwewantedtobid

everyjob(andyoucannotwinthejobifyoudonotbidonit),we

neededafastmethod.InKansasCity,wehadthetimetodevelop

detailedcostestimates,andsowetookthetime.Therearemany

methodsofestimatingprojectcostsandeachhasitsplace.”

6

PlanCostManagement

•Involvesdevelopingacostmanagementplanforaproject

•Cost&schedulearecloselyrelated

Plancostmanagement–theprocesstodeterminehowtoplan,estimate,&controlprojectcosts.Plancostmanagement–theprocesstodeterminehowtoplan,estimate,&controlprojectcosts.

Costmanagementplan–aliving,evolvingplanthatinvolvesforecasting&refiningcost

estimatesthroughoutthelifeoftheproject.

Costmanagementplan–aliving,evolvingplanthatinvolvesforecasting&refiningcost

estimatesthroughoutthelifeoftheproject.

Costs

included

Activity

resource

estimating

Cost

estimating

Budget

determination Costcontrol

7

PurposesofCostManagementPlan

•Waytodevelop&sharerelevant,accurateandtimelyinfofordecisionmaking

•Providesfeedback,linkingprojecttobusinessobjectives

•Providesdetail&summaryinformation

•Helpsprojectstakeholdersfocusonschedule&costperformance

8

EstimateCost

•Linkedtoscope,schedule,&resourceplanning

•Neverlietoyourselforanyoneelse

•Youmustunderstandwhatprojectcostsreallyare

•Avoidshadingthetruthtosecurenecessaryfunding

Costestimating–“theprocessofdevelopinganapproximationofmonetaryresourcesneeded

tocompleteprojectactivities.”~PracticeStandardforProjectEstimating(PMI)

Costestimating–“theprocessofdevelopinganapproximationofmonetaryresourcesneeded

tocompleteprojectactivities.”~PracticeStandardforProjectEstimating(PMI)

9

EstimateCost

Typesofcosts

Timing&accuracyof

costestimates

Methodsusedto

estimatecosts

Costestimatingissues

10

TypesofCosts

11

Fixedvs.VariableCost

•Fixedcostsremainthesame

•Variablecostsvarydirectlywithvolumeofuse