Here are the calculations based on the project status provided:
PV = $3,000 (Budget for sides 1, 2 and 3)
EV = $2,950 (100% of side 1 + 100% of side 2 + 75% of side 3)
AC = $2,950 (Actual cost spent)
BAC = $6,000 (Budget for all 6 sides)
CV = -$50 (EV - AC)
CPI = 0.99 (EV/AC)
SV = -$50 (EV - PV)
SPI = 0.99 (EV/PV)
EAC = $6,000 (No variance, so EAC equals BAC)
ET
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ادارة تكلفة المشروع
1. Project
Cost
Management
Prepared by: Mohamed Dahi 2013
2.
3. Project Cost Management
Process
Knowledge
Area Monitoring
Initiating Planning Executing Closing
& Control
Cost Estimating Cost
Cost
Cost Budgeting Control
4. Financial Statement
Income statement P/L
Balance Sheet
Economic Analysis
Benefit-cost ratio- Higher BCR, more preferable
Payback Period-Shorter period more preferred project
Break Event Point
ROI (Return on investment)
IRR (internal rate of return Higher IRR, more preferable
project
NPV- Higher PV, more preferable project value is>=0
5. The project cost management process include
Cost estimating
Cost budgeting
Cost controlling
6. Project Cost Management
• T process involved in estimating, budgeting, and controlling cost so
he
that the project can be completed within approved budget
• L cycle costing
ife
Looking at the cost of whole life of the product (include maintenance)
• Value analysis (value engineering)
Looking at less costly way to do the same work within the same scope
• L of Diminishing Returns
aw
E adding twice resource to task may not get the task done in half
.g.
cost/ time
7. Resource Determining what resources and
planning quantities of them should be used.
Cost Developing an estimate of the costs and
estimating resources needed to complete a project.
Cost Allocating the overall cost estimate to
budgeting individual work items to establish a
baseline for measuring performance.
Cost Controlling changes to the project
controlling budget.
8. The main outputs of the cost estimating process are:
Cost estimates
Supporting detail
Cost management plan
9. Cost Management Plan
Describes how cost variances will be managed on the
project.
Content:
Level of accuracy
Reporting format
Rules for measuring cost performance
Cost baseline
Control thresholds
Cost change control procedures
10.
11. Cost Estimating 7.1
The process of developing approximation of the monetary
resources needed to complete project activities
Points for estimating (WBS-person doing work -historical
information- No Padding –Realistic)
What do you need before estimating costs
o Cost trade-offs ))المقايضةrisk must be considered
How is estimating done?
.Feedback to tender depart
12. 1.The proposal estimate is prepared before proposal and
initiation to commit resources to the first stage of the
project.(-تقدير مرافق لدراسة الجدوىorder of magnitude –made
without any detailed eng-data).()مقترحROM)
2. The budget estimate is prepared during proposal and
early planning , and commit resources to design and
appraisal.-تقدير من اجل تقييم البدائل التصميمية
3. The sanction estimate is prepared during design and
appraisal to gain funding for the project, or approval from
the project sponsor.تقديرات اولية- الجازة
4. The control estimate is prepared during implementation
planning.تقديرات تفصيلية
5. A tender estimate is prepared as part of the process of
bidding for a contract.سعر العطاء
13. :Estimating methods used to prepare types of estimate
Type of Estimate (%)Accuracy
Proposal estimate + - 50
Budget estimate 20 - +
Sanction estimate + - 10
Control estimate +-5
Tender estimate +-2
19. Types of Cost
Variable Costs
Change with the amount of production/ work
e.g. material, supplies, wages
Fixed Costs
Do not change as production change
e.g. set-up, rental
Direct Costs
Directly attributable to the work of project
e.g. team travel, recognition, team wages
Indirect Costs
overhead or cost incurred for benefit of more than one project
e.g. taxes, fringe benefit, janitorial services
Cost reserves: amount of money needed above the estimate to
reduce risk of overruns of project objectives to a level acceptable to
the organization
21. Cost Estimating Tools
• Analogous estimates -unit method
Using the actual cost of a previous, similar project
Used when there is limited information
Form of expert judgment- used in the early project stages
• B ottom up estimating
Estimating the cost of individual work items ,then rolling up
to get total project cost
• P arametric modeling-(statistical )
Using project characteristics in a mathematical model-may
be simple with very few parameters e.g. (construction per
squire foot calculation) -
• T hree P oint Estimating
22. One point estimating
Approximation of a single quantity or a single numerical value, instead of
that of a whole range of quantities or values.
Analog costing
Computing cost of an item on the basis of the cost of a similar (analogous)
item and using adjustment factors to account for differences between
the two items.
Parametric cost estimating
Methodology that employs one or more cost estimating relationships for
quantifying research and development (R& costs.
D)
23. Ranges Of Estimates
Rough Order of Magnitude.
An approximation, made with a degree of knowledge and confidence
that the estimated figure falls within a reasonable range of values-
Budget Estimate
Approximation of the cost of an activity, job, program or project, prepared
for budgeting and planning purposes only. Not accurate enough to provide
a basis for a firm commitment, it represents only the budget maker's
understanding of the scope and expense of what needs to be done.
Definitive Estimate
24. Quality/Accuracy of Cost Estimation
Estimate Accuracy WBS level 1
Ball Park
Rough • M difficult to estimate as very little project
ost
Order of info is available, made during initiating
Magnitude 50% -/+ process- parametric method
(ROM) WBS level 2,3
• Used to finalize the Request for
Budget 10%- Authorization (RF A), and establish
commitment, made during early planning
Estimate 25%+ phase- analogy method
Definitive 5%- • During the project and refined
• late planning & execution-
Estimate 10%+ • grassroots method
WBS level 4,5,6
25. Cost Budgeting 7.2
Process of aggregating the estimated cost of
individual activities or work packages to establish
an authorized cost baseline.
Allocating the overall cost estimate to individual
activates or work packages, in order to establish a
cost baseline for measuring project performance.
27. Cost Aggregation
Reserves & risk management Cost Budget
are important while estimating! Management reserves
Contingency reserves: Cost Cost baseline
Baseline Contingency reserves
the cost impacts of the remaining risk Project estimates
Control account estimates
Management reserves: Cost Work package estimates
Budget Activity estimates
extra fund to cover unforeseen risk or
changes to the project
28. $1.423 Cost Budget
Example
$68 Management reserves
$1.355 Cost baseline
$105 Contingency reserves
$1.250 Project estimates
CA1$850 CA2$480 Control account estimates
WP 1$100 WP2$250 WP3$500 WP4$175
Work package estimates
A 1$25 A2$25 A 3$25 A 4$25 A 5$45
Activity estimates
29. Funding Requirements
Cumulative values
Is the time
phased budget
that is used as
the basis
Cost Baseline against whish
the progress is
measured
Expenditures
Time
30. Control Cost 7.3
The process of monitoring the status of the project to
update the project budget and managing changes to
the cost baseline
31. الدهداف من مراقبة التكاليف بالنسبة للمالك والمقاول
بالنسبة للمالك
استل م المشروع فى الميعاد المحدد له حتى تتحقق له اعادة دورة راس المال
فى حالة عقود تعويض التكاليف cost reimbursementتكون مسئولية
المالك هى مراقبة التكالف لهنه سيكون مسئوال عن شراء جميع المواد
بالنسبة للمقاول
التأكد من تنفيذ وتسليم المشروع فى الميعاد المحدد
التاكد من التكاليف الفعلية تسير كما هو مخطط
فى حالة العقود محددة السعار مقدما price given in advanceيقو م المقاول
بأخذ المشروع بسعر معين لذلك فهو المسئول عن شراء جميع المواد وبذلك تكون مسئوليته
الساسية حتى ل يقل هامش الربح المخطط
العاومل التى تؤثر على اختيار فترات المتابعة
تعقد وتكثف اهنشطة المشروع يؤدى الى تكثيف وتقليل فترات المتابعة وخاصة اثناء التشطيبات
تعتمد فترات المتابعة اساسا على مدة المشروع فكلما زاد زمن المشروع زادت فترات المتابعة
درجة الدقة فى التنفيذ تزداد كلما زادت المتابعة على المشروع
32. Inputs Tools & Outputs
Techniques
1.Work
1.Project 1.Earned value performance
management management measurement
plan
2.Forecasting 2.Budget forecast
2.Project
funding
3.To-complete 3.Organizational
performance process
requirement
index updates
3.Work
performance
4.Performance 4.Change
reviews requests
information
4.Organizational 5.Variance 5.Project
analysis management
process assets
6.Project plan updates
management 6.Project
software document
updates
33. ?How to control cost
Follow the cost management plan
Look at any organizational process asset that are
available
Manage change
Recording all appropriate change
Preventing incorrect change
Ensuring requested changes are agreed upon
Managing the actual changes when and as they
occur
Measure and measure and measure (monitoring)
34. Progress Report:
A method to control schedule and cost
Progress/performance report (output from communication area)
Where work cannot be measured, estimate could be done by a guess-
rules
50/50 Rule
20/80 Rule
0/100 Rule
PCT: the amount of units completed copmared to the total amount
planned
Activity is considered X percent complete when it begins and get
credit for the last Y percent only when it is complete
35. Earned Value Technique
Method to measure project
performance against scope,
schedule and cost baseline
(performance measurement
baseline
36. BCWP
BCWS ACWP
PV AC
EV
It builds on the concept of comparing banana with banana
not banana with watermelon.
Its enables P.M through a simple and effective analysis
,to get timely updates and forecasts on project’ s time and
cost performance.
37. How EV Works?
The value the contractor is entitled to receive from
the owner based on estimated prices and actual
amount of work performed.
This is way called earned value
E =P * B
V CT AC
38. Planned value (PV)
Is the cost of work that's been budgeted for
a schedule activity or W S component to be completed
B
during a given time period .
P is also called (B S)
V CW
Actual Cost (AC)
Is the cost of completing the work ( a schedule activity
or W S component ) in a given time period. AC is also
B
called (ACW P)
Earned Value (EV)
Is the value of the work ( a schedule activity or W S
B
component ) completed to date as it is compares to the
budget amount assigned to the work component. E isV
also called (B P)
CW
40. Exercise
You have a project to build a box. The box is six sided. Each side is to take one day to
build and is budgeted for $1000 per side. The sides are planned to be completed one after
the other. Today is the end of day three.
Using the following project status chart, calculate PV, EV, AC, BAC, CV, CPI, SV, SPI,
EAC, ETC, VAC.
Describe your interpretation based on the calculation!
Project is below/
over budget?
Project is late/
ahead schedule?
H much more money we need?
ow
41. Task Progress Cost spent
Side 1 100% $1,200
Side 2 100% $1,000
Side 3 75% $750
Side 4 50% $500
Side 5 0% $0
Side 6 0% $0
49. 3450 PV
3025 EV
CPI=1.01
3000 AC SPI= .88
CV =EV - AC 25+ SV =EV - PV 400 -
50. Late PV
Early EV
Over AC Under PV
EV AC
AC PV
Early Late
EV EV
Over Under
PV AC
51. EVM – Hints to remember
EV comes first in every formula
If it’s variance, the formula is EV – something
If it’s index, EV / something
If it relates to cost, use Actual Cost
If it relates to schedule, use PV
Negative numbers are bad, positive is good
Copied from Rita’s book
52.
53. مخطط كفاءة الجدولة والتكلفة
التنتاجية أفضل من المقدرة
التنتاجية أسوأ من المقدرة
تأخير بدء بعض المعمال
ظروف معمل غير ملمئمة
CPI اختصار بعض سامعات العمل
ظروف معمل ملمئمة
حالة توفير التكلفة وتأخير في العمل 2.1 حالة توفير التكلفة والتنفيذ المتقدم في العمل
1.1
1
SPI
8.0 9.0 1.1 2.1
9.0
8.0 وجود أعمال إضافية
زيادة بعض السعار
انتاجية أسوأ من المقدرة بدء بعض المعمال قبل وقتها
ً
مهارات العمال أفضل من المتوقع و كلفتهم ايضا
أمعمال أصعب من المتوقع
خطة غير جيدة
حالة زيادة التكلفة والتنفيذ المتقدم في العمل
حالة زيادة التكلفة وتأخير في العمل
54. Earned Value Technique
4/0.33
Revised Total Duration Baseline Duration/Schedule Performance Index
= 12 months
56. Earned Value: Graphical Representation
TODAY
(Reporting
day) Projection of
schedule delay
at completion
Estimate at
Completion
EAC (EAC)
Projection of
cost variance
at completion
BAC
(VAC)
AC Budget at
Completion
(BAC)
COST
Cost
Variance
(CV)
PV
Schedul
e
ACTUAL Varianc
EV e (SV)
PLAN
EARN
VALUE
TIME
Project is over budget behind schedule
58. over budget, getting 0.88 dollar for every dollar we spent,
ahead schedule, progressing 101% of the rate planned,
probably will spend $6818 at the end (estimation),
need $3368 to complete,
over budget at the end for about $818 (estimation)
59. Forecasting EAC
There are many ways to calculate EAC, depending on the assumption made.
Simple EAC calculation (EAC = BAC/CPI) assume that the cumulative CPI
adequately reflects past performance that will continue to the end of the project.
()يستمر
AC+(BAC-EV)
Used when current variances are thought to be atypical of the future ( )لن يستمر
60. (To-Complete Performance Index (TCPI
Helps the team determine the efficiency that
must be achieved on the remaining work for a
project to meet a specified endpoint, such as
BAC or the team’s revised EAC
TCPI
Work Remaining (BAC – EV)
=
Funds Remaining (BAC – AC)