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