This lecture presents key concepts related to project cost management. In this chapter, the following content will be discussed: Developing the schedule, critical path method, schedule trade-offs using CPM, shortening the schedule, critical chain scheduling, PERT technique. | Project Cost Management SEII-Lecture 7 Dr. Muzafar Khan Assistant Professor Department of Computer Science CIIT, Islamabad. 1 Recap Developing the schedule Tracking Gantt charts Critical path method Longest path, earliest time Schedule trade-offs using CPM Free slack, total slack Shortening the schedule Crashing, fast tracking Critical chain scheduling Availability of critical resources, project and feeding buffer PERT technique Controlling the schedule 2 Importance CHAOS studies 180% in 1994 56% in 2004 Other studies 33-34% (in all projects) US Internal Revenue Service $50 billion loss in 1990 UK National Health Service $26 billion loss in 2002 3 Basic Concepts [1/4] Cost A resource sacrificed to achieve a specific objective Something given up in exchange Often measured in monetary amounts Profit Revenues minus expenditures Profit margin Ratio of revenues to profits 4 Basic Concepts [2/4] Life cycle costing Cost of a project throughout its life cycle Cash flow analysis Determining the estimated annual costs and benefits and resulting annual cash flow Tangible cost and benefit Easily measurable in monetary terms Intangible cost and benefit Difficult to measure in monetary terms Harder to justify 5 Basic Concepts [3/4] Direct costs Directly related to producing the products and services Can be controlled Indirect costs Not directly related Very little control Sunk cost Money spent in the past Not included while deciding further investment Learning curve theory Continuous production reduces unit cost 6 Basic Concepts [4/4] Reserves The money reserved to mitigate cost risk Contingency reserves / known unknowns Management reserves / unknown unknowns 7 Main Processes Estimating costs Main outputs: activity cost estimates and basis of estimates Determining the budget Main outputs: cost performance baseline, project funding requirements Controlling costs Main outputs: work performance measurements, budget forecasts, and change requests 8 Estimating Costs [1/2] Rough Order | Project Cost Management SEII-Lecture 7 Dr. Muzafar Khan Assistant Professor Department of Computer Science CIIT, Islamabad. 1 Recap Developing the schedule Tracking Gantt charts Critical path method Longest path, earliest time Schedule trade-offs using CPM Free slack, total slack Shortening the schedule Crashing, fast tracking Critical chain scheduling Availability of critical resources, project and feeding buffer PERT technique Controlling the schedule 2 Importance CHAOS studies 180% in 1994 56% in 2004 Other studies 33-34% (in all projects) US Internal Revenue Service $50 billion loss in 1990 UK National Health Service $26 billion loss in 2002 3 Basic Concepts [1/4] Cost A resource sacrificed to achieve a specific objective Something given up in exchange Often measured in monetary amounts Profit Revenues minus expenditures Profit margin Ratio of revenues to profits 4 Basic Concepts [2/4] Life cycle costing Cost of a project throughout its life cycle Cash flow analysis Determining .
