IS5540 Project Management & Quality Assurance Week 6 - Project Cost Management Schwalbe: Managing Information Technology Projects, Chapter 7 Adapted by Janet Yu , Frank Lo

PMI Framework: 9 Knowledge Areas People Integration Scope Time Cost Quality Communication Risk Procurement

If costs not managed carefully…..

Table 7-1: Costs of Downtime for IT Applications

Table 7-2: Types of Cost Estimates

Estimate Costs

Figure 7-2: Surveyor Pro Project Cost Estimate

Figure 7-3: Surveyor Pro Software Development Estimate

Determine Budgets

Figure 7-4: Surveyor Pro Project Cost Baseline *Numbers are rounded, so some totals appear to be off.

Steps to Come Up with a Project Budget? Cost Budget Management Reserve Cost Baseline Contingency Reserve Project Work Packages Activities ? ? ? ? ?

Control Costs

Earned Value Management (EVM) Planned Value (PV) How much work should have been done? Earned Value (EV) How much work has been done? Actual Cost (AC) How much has been spent? Budget At Completion (BAC) What was the entire project supposed to cost? Estimate At Completion (EAC) What is the project expected to cost now?

Earned Value Management (EVM) Cost Variance (CV) Deviation from the original budget (in monetary terms)? Schedule Variance (SV) Deviation from the original schedule (in monetary terms)? Cost Performance Index (CPI) How well is the WBS component doing in terms of cost? Schedule Performance Index (SPI) How well is the WBS component doing in terms of schedule?

Summary of Formulae PV Planned Value Budgeted cost for the work scheduled EV Earned Value Budgeted amount for the work actually completed AC Actual Cost The total cost incurred BAC Budget at Completion Original budget CV Cost Variance EV – AC CPI Cost Performance Index EV / AC SV Schedule Variance EV – PV SPI Schedule Performance Index EV / PV ETC Estimate to Complete (BAC - EV) / CPI (assuming typical variances) EAC Estimate at Completion AC + ((BAC – EV) / CPI) or simply BAC / CPI VAC Variance at Completion BAC – EAC Estimated Time to Complete Original time estimate / SPI

Performance of Programming Project PV Planned Value $10K x 3 = $30K EV Earned Value $10K x 2 = $20K AC Actual Cost $16K BAC Budget at Completion $10K x 10 = $100K CV Cost Variance $20K – $16K = $4K CPI Cost Performance Index $20K / $16K = 1.25 SV Schedule Variance $20K – $30K = $-10K SPI Schedule Performance Index $20K / $30K = 0.67 ETC Estimate to Complete ($100K - $20K) / 1.25 = $64K EAC Estimate at Completion $16K + $64K = $80K $100K / 1.25 = $80K VAC Variance at Completion $100K - $80K = $20K Estimated Time to Complete

Figure 7-5: Earned Value Chart for Project after Five Months

Steps to Come Up with a Project Budget? Cost Budget Management Reserve Cost Baseline Contingency Reserve Project Work Packages Activities 10 + 20 30 + 40 30 70 100 100 x 10% = 10 100 + 10 = 110 (time-phased) 110 x 10% = 11 110 + 11 = 121 $

Appendix on Function Point

Function Complexity Weightings Function Type Low Average High External Input 3 4 6 External Output 4 5 7 Logical Internal File 7 10 15 Ext. Interface File 5 7 10 External Inquiry 3 4 6 1-5 Data element types 6-19 Data element types 20+ Data element types 0-1 File types referenced Low Low Average 2-3 File types referenced Low Average High 4+ File types referenced Average High High