...Overview of Project Cost Management According to an accounting textbook, cost is defined as a resource sacrificed or foregone to achieve a specific objective. It is something given up in exchange. It is necessary for project managers to understand project cost management since project costs money and consumes resources. There are reasons for project cost overrun and these are as follows: * Not emphasizing the importance of realistic project cost estimates from the outset. IT project cost estimates are low to start with or based on unclear project requirements. * Many IT professionals think that preparing cost estimates is a job for accountants when in fact, it is a very demanding and important skill that project managers need to acquire. * Many IT projects involve new technology or business processes that involve untested products and inherent risks. Project cost management involves the processes required to ensure that the project is completed within an approved budget. These processes are as follows: * Estimate costs * Determine budget * Control costs As project managers, understanding the basic principles of cost management is a must in order for them to be effective in managing project costs. Important concepts include profits and profit margins, life cycle costing, cash flow analysis, internal rate of return, tangible and intangible costs and benefits, direct costs, sunk costs and learning curve theory. Profits are revenues minus expenses...
Words: 2211 - Pages: 9
...Research Proposal: The Importance of Project Cost & Communication Management Project Management in general is based on the methodology of the triple constraint. Where the effective management of time, cost and scope/quality can define the success of a project. It is generally expected that the number one concern for project managers is to manage the triple constraint. Although, project managers used the triple constraint to evaluate and balance these competing demands in a project, it also became a measurement of project success. With today’s marketplace and the complexities they bring the triple constraint is not enough to properly define when a project was actually successful. There is evidence where projects have been delivered on time, within budget and meeting all project specification and still not perceived as successful by the stakeholders. The reasoning behind these results is that there are obviously other criteria just as important as the triple constraint to truly classify a project as successful. How to identify project success Identifying the success of a project is not based solely on whether the project was completed on time, there are other factors to measure. Learning from failed projects is also a critical part of creating success in the overall results. Projects can be evaluated in a manner that works for the industry or business the evaluation is being conducted for. This process is not rigid in essence, it may include things such as online surveys...
Words: 2791 - Pages: 12
...Management of every entity aims at maximizing the returns and minimizing the costs. This is the fundamental aspect related to the project cost management. (Smith, 2014). This makes it clear that appropriate management style is important for an entity to prosper. There are various projects the management deals with simultaneously, but these are based on individual importance. The time and other resources to be allocated on a particular project depend on its individual importance. So, if a project is significant, then the management would look into other matters related to cost and project completion. Managing cost for a project requires expertise, and most of the larger companies tend to have the services of professional surveyors, economists, and engineers etc, who perform the task of managing costs for a particular project. Project cost management involves the use of technology. This is the latest development in the field of project management. The global issue relates with the fact that there are many countries that have not yet incorporated the latest technology in project cost management. (Xiao, 2014). This makes it difficult to establish global project management practices, as the same use of technology is not there. The article states that the lack of common practices and professional standard is an issue that affects all the project cost management professionals. (Smith, 2014). Whether they are engineers, surveyors or economists, all are affected by this. This is where...
Words: 539 - Pages: 3
...Pitney Bowes System Marcus Simeon CMGT 410 November 23, 2010 Susan Peterson Abstract The project addresses two major problems that could affect the implementation of the Pitney-Bowes tracking system in the warehouse. The first is an operational problem that involves the material handlers. The second would be a technical problem that could occur during the interface between two components in the tracking system. Two contingency plans are offered in the project in helping resolve the two problems likely to arise. Description of Operational Problem The warehouse in Naval Medical Center San Diego are managed by material handlers, half of which are composed of old veterans who have a hard time adjusting to new ideas. The old timers are accustomed to writing down the tracking numbers and call numbers on a tracking sheet. The material handlers find this method easier and faster. The material handlers would need to have on-the-job training to get familiar using the barcode scanner, downloading it to the assigned computers, printing out the tracking sheets, processing the receipts, updating the processed tracking sheets, delivering the supplies, and making sure to scan the material again and have the supply technician sign the receipt and barcode scanner. The material handler then, needs to download the contents of the barcode scanner to complete the entire procedure. If for some reason one of the procedures is not followed...
Words: 1024 - Pages: 5
...Introduction 1.1 Purpose The purpose of this cost management plan is to define the methodology by which costs associated with the Building Expansion Project will be managed. This is necessary to ensure the successful completion of the project within the allotted budget constraints. There are several cost components associated with this project as well as many metrics, cost variance considerations, and reporting which this plan will outline. To complete this project successfully, all key project members and stakeholders must adhere to and work within this cost management plan and the overall project plan it supports. The Project Manager will be responsible for managing and reporting on the project’s cost throughout the duration of the project. During the monthly project status meeting, the Project Manager will meet with management to present and review the project’s cost performance for the preceding month. Performance will be measured using earned value. The Project Manager is responsible for accounting for cost deviations and presenting the Project Sponsor with options for getting the project back on budget. The Project Sponsor has the authority to make changes to the project to bring it back within budget. 1.2 Scope This section describes what will be included in the cost management plan for this particular project. Project costs may consist of many internal and external components or unique items depending on the nature of the project. It is important to define the scope of...
Words: 1666 - Pages: 7
...Cost Management Plan The risk management tool that I would like to discuss is the cost management plan. The definition according to PMBOK is “a document that sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project costs”. The cost management plan is often packaged inside of a larger project management plan which will demonstrate how to effectively control and execute the overall strategy. The cost management plan may be formal or informal, extremely detailed or loosely framed depending on what the project needs. An effective cost management plan can establish the following: 1. Level of accuracy- Activity cost estimates need to be consistent and uniform based on the scope and size of the project. This is where you could add risk contingency categories as well. 2. Units of measure- Each unit shown must be measured and labeled while also easy to locate 3. Organizational links- These can be shown as part of the WBS and its framework. Consistency is key in regards to estimates, budgets, cost controls, and projected overages. Often codes or account numbers are used to link an accounting system to an individual control account (CA). 4. Control thresholds- Variance thresholds for monitoring cost performance can be included and will help determine how much variation is allowed before something needs to be done. PMBOK mentions that thresholds are typically expressed as a percentage of deviations from the...
Words: 902 - Pages: 4
...COST AND VALUE MANAGEMENT IN PROJECTS Ray R. Venkataraman and Jeffrey K. Pinto John Wiley & Sons, Inc. This book is printed on acid-free paper. Copyright 2008 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created...
Words: 94122 - Pages: 377
...Name: Hrushikesh S Datar ID: 10320626 Assignment: Project management analysis report. Introduction: Project management is an important department in an organisation. Project manager is a sort of connecting link between senior and junior level management. A project management means a process of planning, managing resources and working together to achieve a common goal. Furthermore, Project management includes five steps of system development life cycle i.e. initiation, planning, controlling, closing and development. (Project_management) Definitions: A project management can be defined as “A process of planning, monitoring, control and reviewing projects by using principles and techniques.” (http://www.businessdictionary.com/definition/project-management.html) “A phenomenon where definition, control, planning, deployment and monitoring comes together to get a common benefits is known as project management.” (Definitions.asp) “A project management is a summation of all models and methodologies which needs individual task completion.” (www.actano.com/20911_EN-What%B4s_new-Glossary.htm) PMBOK categories for effective project management: A project undertaken by well known university in New Zealand is to design and develop complaint management system for students in a university. Project Overview: A university is developing online complaint management system in which students can lodge their complaints on a portal created by university and connected to the website of the...
Words: 1722 - Pages: 7
...Information Systems Project Management Unit 3 Assignment 1 Kaplan University IT511 Professor Chad McAllister February 16, 2013 1. Explain project scope management in terms of its processes. Scope management is the process of defining and controlling the work that is or is not included in the project (Schwalbe, 2012). This outlines to the team and stakeholders the product that will be produced and the processes that will be used to produce that product. The project scope management consists of five processes: * Collect requirements- This process defines the specific details of a product’s functions and features. Defining the processes for creating the products is defined in this process and results in the following outputs: stakeholders’ requirements documentation, a requirements management plan and a requirements traceability matrix. * Define the scope- The project charter, requirements documents and organization process assets are the inputs that are needed to determine the project scope. This process has two outputs the project scope statement and updates to the project documents. * Create the WBS- This process involves decomposing the major deliverable on the project into manageable elements resulting in the WBS and dictionary, a scope baseline and updates to the project documents. * Verify the scope- This is the formalized acceptance of the scope statement by the stakeholders, customers and the project sponsor. If the scope statement is...
Words: 2413 - Pages: 10
...rojects cost. Have you ever worked with a client who had a huge vision for a project, but had little capital to invest into the vision? Or have you worked with a client who gasped when you revealed how much it would cost to complete their desired scope of work? Or have you been fortunate and had a customer who accepted the costs for the project at face value, made certain the funds were available, and sent you on your way to complete the work? As a general rule, management and customers are always concerned with how much a project is going to cost in relation to how much a project is going to earn. Most likely there is more negotiating, questioning, and evaluating for larger projects than for smaller ones. The relation between the project cost and the project scope should be direct: you get what you pay for. Think it’s possible to buy a mansion at ranch home prices? Not likely. Think it’s possible to run a worldwide marketing campaign at the cost of a postcard mailer? Not likely. A realistic expectation of what a project will cost will give great weight to the project’s scope. As the business need undergoes analysis, progressive elaboration and estimates are completed based on varying levels of detail, and eventually the cost of project will emerge. Often, however, the predicted costs and the actual costs vary. Poor planning, skewed assumptions, and overly optimistic estimates all contribute to this. A successful project manager must be able to plan, predict,...
Words: 1788 - Pages: 8
...PROJECT COST MANAGEMENT Juan Gonzales, a systems analyst and network specialist for a waterworks department in a Mexican city, had always aspired to be a project manager to expand his knowledge. A friend of Juan’s invited him to attend a project review meeting that included a project that Juan was interested in. This project was for the Surveyor Pro information system which would assist government surveyors to do their job more effectively by providing additional tools. While Juan was in attendance, he quickly learned that the meeting focused on budget related conversations rather than the actual project. The primary issue with this case is that Juan doesn’t have any background in cost management. Juan sees how important the government officials are reviewing other projects cost management and he should understand how cost management plays into being a project manager. This could also add a new facet to Juan’s career. And while time and resource issues are always noteworthy, the factor that often has the biggest influence on project success or disaster is whether or not the project team can – or cannot – enhance project outputs with effective cost management. The government officials are concerned with cost management because IT projects have a poor track record for meeting goals. According to a 1995 report from The Standish Group, we spend more $250 billion each year on IT projects in the United States. The average cost ranges from $2 million for a large...
Words: 519 - Pages: 3
...Pm3 essay | Project Procurement Management in Information Systems Projects | Mogamat Shaheed Adams (207191948) | | INFORMATION SYSTEMS III (MODULE A) | 21 September 2010 LECTURER: Mr S Dunn | Project Procurement Management in Information Systems Projects ABSTRACT It is becoming increasingly important for information technology professionals to understand project procurement management. Procurement management has become a tool that can save organizations huge amounts of cost. Therefore the emphasis on expert knowledge surrounding the procedures and stages through project procurement management are becoming so necessarily. There are numerous tools and techniques available to project procurement teams to get favourable results and outputs. These outputs become important tools to organizations to use in the future on similar projects. INTRODUCTION Acquiring products or services under contract using outside buyers or sellers has become a very important aspect to many organizations. The reasons is that it reduce both fixed and recurrent costs, allowing client organizations to focus on its core business, organizations can gain access to specific skills and technologies, providing flexibility where extra staff can be provided during periods of peak workload, and increasing accountability because contracts are legally binding. To be successful in project procurement management there are four main processes for organizations to follow. They are planning...
Words: 1954 - Pages: 8
...PROJECT MANAGEMENT MODERN PROJECT MANAGEMENT 1. Define a project 2. Identify the stages involved in s project life cycle 3. Determine the roles of a project manager 4. Explain the importance of project management ORGANIZATION STRATEGY AND PROJECT SELECTION 1. Understand the strategic management process and the four activities involved at such 2. Define and explain the need for an effective project portfolio management system 3. Identify the classifications of a project 4. Identify sources and solicitation of project proposals 5. Rank proposals and select projects 6. Explain how to effectively manage a portfolio system in terms of risks and types of projects ORGANIZATION: STRUCTURE AND CULTURE 1. Determine the different project management structures 2. Identify the different ways to organize projects 3. Explain the essence of right project management in terms of both organizational considerations and project considerations 4. Explain organizational culture and justify its implications to organizing projects DEFINING THE PROJECT 1. Identify the different steps involved in defining a project 2. Understand process breakdown structure 3. Explain the responsibility matrices 4. Understand project communication plan ESTIMATING PROJECT TIMES AND COSTS 1. Identify the factors influencing the quality of estimates 2. Understand estimating guidelines for times, costs and resources 3. Compare between top-down and bottom-up estimating 4. Determine the methods...
Words: 819 - Pages: 4
...Advance Project Management PM587, Week 3 quiz Keller Graduate School of Management Week 3 quiz covers material from Weeks 1 2 and 3 Grading Summary These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. Date Taken: 7/28/2012 Time Spent: 58 min , 25 secs Points Received: 72 / 80 (90%) Question Type: # Of Questions: # Correct: Essay 4 N/A Grade Details - All Questions 1. Question : (TCO A) You work for company Bravo and have been asked to create a presentation for the Board of Directors to explain PPM. Your presentation is to include a comparison and contrast of project portfolio management, program management, and project management. The presentation should also include the benefits of PPM and why the company should implement this program. Below, in your own words, write the narrative for the presentation. Be sure to address all elements of the presentation. Student Answer: Bravo Board of Directors Presentation PPM A PPM stands for Project Portfolio management. It is a management process used to develop a series of projects that are grouped into a portfolio based upon similar strategic objectives of the organization. The Project Portfolio management does not actually manage the project; however the management group creates guidelines and processes, which are then enforced to select the proper projects that will allow the organization...
Words: 1392 - Pages: 6
...SDSU GE/OM 569 Project Management 3 April 2013 Where are we now? PMBOK – 5th Edition (2013) 1 Executing, Monitoring & Controlling Executing Process group consists of those processes performed to complete the work defined in the project management plan to satisfy the project specifications. Results may require planning updates & rebaselining Large portion of budget is expended performing the execution process group 3 Executing, Monitoring & Controlling… The Monitoring & Controlling process group consists of those processes required to track, review & orchestrate the progress & performance of the project, identifying any areas in which changes to the plan are required and initiate the corresponding changes. What work does it monitor & control? Product work Project work 4 2 Executing, Monitoring & Controlling 5 Executing, Monitoring & Controlling 6 3 The Project is Up and Running: Now What? You want what? When! I have jury duty! The software doesn’t do that? That is not what I want! We have to be done by….! The software (critical) will be late! Why not add this?! You never asked for that?!? Just have your team do it! 7 Validate Scope 8 4 Validate Scope Validate Scope is the process of formalizing acceptance of the completed project deliverables. It includes… Reviewing deliverables with the customer or sponsor to ensure they are completed satisfactorily, and Obtaining their...
Words: 5806 - Pages: 24
