MECH896 2015 Lecture 6: Cost Management (rev3) Rules on using templates MECH 896 – Professional Development for MEng Students 1) Must reference the template used 2) Use only outline and structure. 3) All wording must be your own (any document). Mohamed Hefny and Brian Surgenor ([email protected] and [email protected]) Winter 2015: Lecture #6 Project Cost Management MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Assignment #6A: Questions Submit written answers to following questions and be ready to discuss them in class. 1) Identify the challenges health crises control projects face. 2) State involved stakeholders in health critical projects. 3) Based on the case studies, discuss the keys to success in such project. Homework Discussion MECH‐896 Professional Development for MEng Students ‐ Winter 2015 3 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Assignment 6B: Questions 1) Compare Portfolio, Program, and Project Management. 2) Identify the project process groups and discuss their interactions. 3) Name the Project Management Knowledge areas. 4) List the essential components of a project charter. 5) Define the WBS dictionary. 6) List precedence relationships in PDM. MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Project Cost Management MECH‐896 Professional Development for MEng Students ‐ Winter 2015 6 1 MECH896 2015 Lecture 6: Cost Management (rev3) Plan Cost Management Cost Management Plan • • • • MECH‐896 Professional Development for MEng Students ‐ Winter 2015 7 PMBOK 2013 PMBOK is a trademark for PMI Estimate Costs Units of measure Level of precision Level of accuracy Control thresholds MECH‐896 Professional Development for MEng Students ‐ Winter 2015 8 Cost Estimates • Rough order of magnitude (ROM) • Make vs. buy • Buy vs. lease MECH‐896 Professional Development for MEng Students ‐ Winter 2015 9 PMBOK 2013 PMBOK is a trademark for PMI Three‐point Estimating • • • • MECH‐896 Professional Development for MEng Students ‐ Winter 2015 10 Determine Budget Most likely (cM) Optimistic (cO) Pessimistic (cP) Triangular distribution – cE = (cO + cM + cP)/3 • Beta distribution – cE = (cO + 4cM + cP)/6 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 11 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 12 PMBOK 2013 PMBOK is a trademark for PMI 2 MECH896 2015 Lecture 6: Cost Management (rev3) Cost Baseline, Expenditure, and Funding Requirements Project Budget Components MECH‐896 Professional Development for MEng Students ‐ Winter 2015 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 13 PMBOK 2013 PMBOK is a trademark for PMI 14 PMBOK 2013 PMBOK is a trademark for PMI Earned value management (EVM) Control Costs • Key dimensions – Planned value (PV) – Earned value (EV) – Actual cost (AC) • Variances from approved baseline – Schedule variance (SV = EV ‐ PV) – Cost variance (CV = EV ‐ AC) – Scheduled variance index (SPI = EV/PV) – Cost performance index (CPI = EV/AC) MECH‐896 Professional Development for MEng Students ‐ Winter 2015 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 15 PMBOK 2013 PMBOK is a trademark for PMI Earned Value, Planned Value, Actual Costs 16 Forecasting • Budget at completion (BAC) • Estimate to complete (ETC) • Estimate at completion – EAC = AC + ETC • EAC forecast for ETC work performed at the budget rate – EAC = AC + (BAC ‐ EV) • EAC forecast for ETC work performed at the present CPI – EAC = BAC/CPI • EAC forecast for ETC work performed considering both SPI and CPI – EAC = AC + [(BAC – EV)/SPI * CPI)] MECH‐896 Professional Development for MEng Students ‐ Winter 2015 17 PMBOK 2013 PMBOK is a trademark for PMI MECH‐896 Professional Development for MEng Students ‐ Winter 2015 18 3 MECH896 2015 Lecture 6: Cost Management (rev3) To‐Complete Performance Index (TCPI) To‐Complete Performance Index • TCPI based on BAC – TCPI = (BAC ‐ EV) / (BAC ‐ AC) • TCPI based on EAC – TCPI = (BAC ‐ EV) / (EAC ‐ AC) MECH‐896 Professional Development for MEng Students ‐ Winter 2015 19 Variance Analysis MECH‐896 Professional Development for MEng Students ‐ Winter 2015 20 PMBOK 2013 PMBOK is a trademark for PMI Basic EVM Calculations • Cost Variance – CV = EV – AC • Schedule Variance – SV = EV – PV • Variance at Completion – VAC = BAC ‐ EAC MECH‐896 Professional Development for MEng Students ‐ Winter 2015 21 Interpretations of EVM Measures MECH‐896 Professional Development for MEng Students ‐ Winter 2015 23 Practice Standard for Earned Value Management 2011 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 22 Practice Standard for Earned Value Management 2011 Independent EAC Assumptions and Calculations MECH‐896 Professional Development for MEng Students ‐ Winter 2015 24 Practice Standard for Earned Value Management 2011 4 MECH896 2015 Lecture 6: Cost Management (rev3) EVM as it relates to PM MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Bicycle Project Data by WBS as of Period 6 25 Practice Standard for Earned Value Management 2011 Bicycle Project Data Summary MECH‐896 Professional Development for MEng Students ‐ Winter 2015 26 Practice Standard for Earned Value Management 2011 Graphical Analysis of the Bicycle Project Data 27 Practice Standard for Earned Value Management 2011 Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 29 Practice Standard for Earned Value Management 2011 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 28 Practice Standard for Earned Value Management 2011 Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 30 Practice Standard for Earned Value Management 2011 5 MECH896 2015 Lecture 6: Cost Management (rev3) Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 31 Practice Standard for Earned Value Management 2011 Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 33 Practice Standard for Earned Value Management 2011 Drill‐down of Contributing Variances MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 32 Practice Standard for Earned Value Management 2011 Graphical Analysis of the Bicycle Project Data MECH‐896 Professional Development for MEng Students ‐ Winter 2015 34 Practice Standard for Earned Value Management 2011 Variance Analysis Report – Part 1 35 Practice Standard for Earned Value Management 2011 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 36 Practice Standard for Earned Value Management 2011 6 MECH896 2015 Lecture 6: Cost Management (rev3) Exercise: The Fence Project Variance Analysis Report – Part 2 • A friend has asked you to manage the project if building a new fence around the perimeter of her small farm that consists of 4 equal sides. • Each side will cost $5,000 and take two days to build. • The plan is to complete sides in sequence. • Today is the end of day 5. • Use the project status chart below to calculate the EVM components. • Analyze the results and discuss it with class. Exercise: The Fence Project Task Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 37 Practice Standard for Earned Value Management 2011 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Day 7 38 Exercise: The Fence Project Day 8 Status Day 5 Value Analysis PV Side 1 Side 2 Side 3 Side 4 EV AS_ _ _ _ _ _ _ _ _ _ AF _ _ _ PF _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Complete _ _ _ _ _ _ _ _ _ _ _ _ AS _ _ _ PS _ _ _ _ _ _ _ _ _ _ AF _ _ _ PF _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Complete CV Spent $5000 CPI _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ AS _ _ _ PS _ _ _ _ _ _ _ _ _ _ _ _ _ _ PF _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ¾ Done _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ PS _ _ _ _ _ _ _ _ _ _ _ _ _ _ PF Not Yet Started MECH‐896 Professional Development for MEng Students ‐ Winter 2015 Spent $3,500 Spent $3750 AC BAC SV SPI EAC ETC VAC 39 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 40 Assignment #7 (for class Mar 3) • Read the PMBOK Chapter 7. • Within one page answer the following questions and submit your answers as “FirstName_A7.pdf” Homework MECH‐896 Professional Development for MEng Students ‐ Winter 2015 41 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 7 MECH896 2015 Lecture 6: Cost Management (rev3) Assignment #7: Questions Reference Submit written answers to following questions and be ready to discuss them in class. 1) Define three‐point estimating and its elements. 2) State the usage of reserve analysis. 3) List the key variables in EVM. 1) A Guide to the Project Management Body of Knowledge (PMBOK®), Project Management Institute, 2013. 2) Practice Standard for Earned Value Management, Project Management Institute, 2011. MECH‐896 Professional Development for MEng Students ‐ Winter 2015 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 44 Deliverables • Develop a cost management plan based on your reading on Cost Management in the PMBOK, add any additional components that can positively contribute to the final project plan. • For any cost components, you must get quotes from the internet, including shipping and handling for each country. If you got your quotes in different currencies, then you have to get exchange rates as well. For man hour rates, get rates from the internet and document the sources. • Hand in the Project Cost Plan before the lecture class next week, and keep a working copy for your final project. • Submit your deliverables as a PDF file named as “FIRSTNAME_P03.PDF”. • Your file must include a cover page. • It recommended to start preparing slides for your final presentation, but they are not required until the end of the course. Class Project Multinational Bank Information Technology Infrastructure MECH‐896 Professional Development for MEng Students ‐ Winter 2015 45 MECH‐896 Professional Development for MEng Students ‐ Winter 2015 8
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