Project Cost Management: Techniques, Planning, and Performance Analysis

This document explores the fundamental concepts of project cost management, encompassing various estimation techniques, the development of a comprehensive cost management plan, and the analysis of budget performance. It delves into the application of earned value management (EVM) and the To-Complete Performance Index (TCPI) to assess cost variations. Furthermore, it examines the process of replanning to bring a project back on budget, including the identification of issues and recommendations for improvement. The document concludes with a review of cost management performance and lessons learned.

Project management
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Table of Contents
Written task.........................................................................................................................3
1. Project cost estimation techniques:.................................................................................3
2. What does a cost management plan outline?....................................................................4
Q3-Q26............................................................................................................................5
Task 1..................................................................................................................................7
Part 1...............................................................................................................................7
Part 2...............................................................................................................................9
Part 3.............................................................................................................................12
References.........................................................................................................................15
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Written task
1. Project cost estimation techniques:
In the project, there is the requirement to estimate the cost and for that several techniques are
used which are as follows:
Analogous estimation: Under this, the estimates which were made in the past for the similar
projects will be used to estimate the cost for the current project. In this, the changes which took
place will be incorporated.
Parametric estimation: In this, the cost will be estimated by the use of statistical modeling and
for that key cost drivers will be used for various parameters which are involved such as duration
and cost.
Bottom-up estimation: In the project, there are various works which are performed and for that
cost will be estimated and then they will be totaled so that overall cost of the project can be
estimated.
Three-point estimation: This is the technique which is developed by the use of program
evaluation and review technique. In this three estimations are made by which the cost estimates
will be made. They will be pessimistic, optimistic and most likely. In this formula will be used so
that weighted average cost will be determined and that is (Co + 4Cm + Cp)/6.
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2. What does a cost management plan outline?
In any project, there are various aspects which are required to be taken into consideration.in this
cost will be considered and then the estimation for the same will be developed. Due to this
reason, it is required that proper plan shall be made so that all of the considerations are
accounted. There are various elements which will be outlined in this such as all the activities
which are required to be carried in the project and also the criteria which will have to be met.
Under this, all the estimates will be provided whether they are related to cost inputs or the cost
outputs. The amount which has been spent will also be included in this. There is the budget
which is made and it is required that it shall be maintained and by the help of the cost
management plan the actions which are to be taken will be planned and the limit which is set will
be maintained. In this, the units of the measure, level of precision, limit to control cost, the
manner in which performance will be measured and other details will be provided in the plan so
that they can be complied with by all.
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Q3-Q26
3. (B) Definitive
4. (A) Cost plus fixed fee
5. (B) CV= EV-AC
6. (B) The process of accumulating costs of individual activities to establish a cost baseline
7. (C) Piping for an irrigation project
8. (D) the process of monitoring the status of the project to update project costs and managing
changes to the cost base line.
9. (C) Plan cost management
10. (B) Control cost
11. (D) Project funding requirement
12. (B) Cost of quality
13. (C) $520000
14. (C) All choices are right
15. (C) Cost management plan
16. (C) Make or buy decision
17. (B) All answers are right
18. (B) Determine budget
19. (C) Scope baseline
20. (C) Project schedule
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21. (A) Planning
22. (A) Project cost and after implementation cost
23. (C) What is the value of the completed work
24. (C) Monitoring and controlling
25. (A) cost variance equals a difference between earned value and actual cost CV = EV-AC
26. (B) Status of an activity is judged for each half (50%) of completeness.
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Task 1
Part 1
1. What were your project budget and budgetary assumptions?
Particular Time took Budgeted Cost
Resources Equipment 1 Week $55000
Facilities 1 Week $10000
Fees and Charges - $15000
Human Resource 2 Week $2000
Materials - $5000
Service and
Statutory costs
$20000
Contingencies and tolerance $10000
Overheads/ Indirect Cost $2000
The budgetary assumptions that are taken for the cost involved include the equipment cost which
will be required for the storage of the data as well as the maintaining the same. There is a
requirement of human resource to integrate the same in an effective way and also in fulfilling the
requirement as desired in the renovation of the site. The assumptions are based on the existing
system and site. There can be an additional cost at the time of testing of the software as well as
the implementation of the changes if there are any changes that may attract additional cost. The
involvement of additional features includes additional facilities charges and the service cost to
implement the changes.
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2. Provide a cost management plan for your project.
The cost management plan is as follows:-
Cost management plan
Unit of Measures Days
Level of Precision 4 Digit after decimals
Cost management procedure Recording of each cost
involved
Control thresholds $10000
Rule of performance
measurement
Earned Value management
Reporting format Brief reports every 15 Days
Approval process Top to bottom
Financial Authorisation and
delegation authority
Manager and top level
management
The measurement of the project will be on the basis of number of days. The focus will be to
reinvent the websites as per the requirement in the minimal time and cost. There is some
advancement required which is the base of the estimates and budgeted cost. The level of
precision will be very much high so that there are no bugs left also it is successful. There is
personal information stored thereby making it important to have optimum security instead of
looking for the cost. The accuracy is critical as even a single bug can result in failure in
implementation of the changes in the website. The priority to have a proper system will be more
preferred over the cost involved for the same. The procedures that would be followed regarding
cost management includes the finding out of all the available options, comparing of the
alternatives, setting of responsibilities of all the human resource in the best possible way to
generate the maximum output. The amount of variation would be considered before any actions
are being taken. The measurement of the performance is very much important for the
organisation which can be measured with the help of rules of performance measurement.
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Part 2
1. Use two cost-analysis methods and tools to demonstrate the cost variations that occurred
in your project.
Earned Value management – The actual performance measurement can be effectively
determined with the help of Earned value management. There can be a determination of the
performance on the basis of work that has been actually completed. There can be a comparison
with the budget that is being made and the actual performance and corrective steps can be taken
in order to put back the project on track in terms of the cost involved as well as the time. It is a
type of cost control technique which can be beneficial to determine the cost involved and also to
have an effective completion of the project.
To-Complete performance index (TCPI) – The TCPI tools are used to determine whether the
actual work performed is within the limits of the budget that is being performed and is of value if
it is completed with the extra cost involved. There can be an effective use of the resources that
are remaining and the work that is still left to be completed. With the help of TCPI, there can be
a determination of the project value and also the efficiency of the project. The steps can be taken
so that the project is completed as per the budgeted cost.
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2. Provide a detailed budget performance report showing variances against baseline
budget.
Particular Actual Cost Budgeted
Cost
Variance
Resource
s
Equipment $62000 $55000 -$7000
Facilities $8000 $10000 $2000
Fees and Charges $15000 $15000 0
Human Resource $4000 $2000 -$2000
Materials $3000 $5000 $2000
Service and Statutory costs $20000 $20000 0
Contingencies and tolerance $4000 $10000 $6000
Overheads/ Indirect Cost $2500 $2000 -$500
There was variance in some of the activities and resources that are required in the completion of
the project. The variance was favourable as well as unfavourable such as the budgeted cost for
the equipment was $55000 but the actual cost was $62000 which was unfavorable. The budgeted
cost for the material was $5000 but the actual cost was of $3000 which was favorable for the
project as the actual cost was low then the budgeted. The reason for the variances can be various
factors such as political, social, technological etc. The reason for the increase in the cost was due
to technological advancement which was not forecasted. This could have affected the changes
that were implemented thereby increasing the cost of better software.
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3. Evidence of replanning to bring the project back to original budget including the reason
replanning is needed and the option available to bring the project back on budget as well as
the option selected.
There is estimation of the further work that is pending to be completed and the resources that are
already been exhausted, available and more required to be brought for completion of the project.
The replanning is required so that the project can be completed in an effective and efficient way.
It is important that the cost involved is minimal and the time consumed is also less thereby
making it important to replan the project as per the actual results and the work remaining. There
are various options available through which the project can be brought back such as the
measurement of the performance with the help of various tools and techniques such as the TCPI,
EVM. Forecasting, Variance analysis, and Performance review. This tools and techniques will
help to bring back the project as per the budget by analysing the actual performance and making
it better with the help of preventive steps.
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Part 3
1. Financial completion activity
In the project, there are certain activities which are to be performed at the end of the project
when it is completed. There are various things which will be performed in this such as the
collection of the project records. In this all the information of the project will be collected so that
it can be used for the further process and results can be interpreted so that the final outcome can
be analyzed and if there are any shortcomings then they will be analyzed. All the funds which are
spent will be checked to identify the wastage is any. There will be proper dissemination which
will be made of that so that the proper approval can be obtained all of the information and the
reports which are made by them shall be up to date. The resources which are used will also be
included and that will be updated for the future use. The project closure will be made and all of
the double checks will be made to eliminate any kind of adverse impact which is there in relation
to the financial aspects.
2. Review of cost management performance
In the project, there are various aspects which are undertaken and it is required to undertake all
the activities in the best manner. Then it will be required that the performance shall be reviewed.
In this project, the cost management is considered and for that, all of the costs which are
undertaken will have to be analyzed so that there are proper conclusions which can be drawn.
There are appropriate tools which are used and also the plan and the budgets which are made
considers all the costs and limit in relation to all are properly set which are managed to acquire
the results by which overall development will be made. The process which has been taken in the
cost management and the controls which are set in this regard are somewhat effective and only
some of the areas are there in which certain issues are being faced. There are such rules which
are formulated and also the resource identification and allocation is performed in a most
appropriate manner by which all of the management will be performed in the best way. Certain
areas are there in which some changes will be required so that the present issues can also be
eliminated in the coming time.
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3. Identification of issues and recommendations for them
Description of problem Recommendation for next
project
Lesson learned raised by
Failure to forecast: In this, all
the aspects are not forecasted
and there are certain areas in
relation to which there are no
considerations which are
made.
For this, it will be required
that research shall be
performed in which all the
areas are covered so that needs
for all of them will be
identified and then steps in
relation to the will be taken.
By that, all the points will be
included in the plan and their
proper implementation will be
made.
Non-identification of
improvement opportunities: In
the global environment there
are various opportunities in
which the company will be
required to make the
improvements. All of them are
not determined by the
business.
All the opportunities which
are there will be identified and
then the best among them will
be undertaken so that required
improvement will be made.
By them, all the latest
modifications will be made by
which the improvement in
overall performance is made.
Only actions are considered
and not the results in cost
estimation: The outcomes are
not considered and due to that
there are certain actions in
which cost is incurred but they
are not adding to the value of
A proper evaluation will be
made while the allocation of
the cost and in that major
focus will be made on the
results which were obtained
and not only on the step which
By that proper allocation of
the funds will be made and
there will be no wastage
which will be made and most
effective utilization of the
resources will be made.
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the project. is to be performed.
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References
 Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to
planning, scheduling, and controlling. John Wiley & Sons.
 Khodakarami, V. and Abdi, A., 2014. Project cost risk analysis: A Bayesian networks
approach for modeling dependencies between cost items. International Journal of Project
Management, 32(7), pp.1233-1245.
 Ramani, S.E. and Sruthi, N., 2016. Application of Earned Value Management to Compute
the Project Performance Using Analytical Network Process. Jordan Journal of Civil
Engineering, 10(2).
 Van Dooren, W. and Van de Walle, S. eds., 2016. Performance information in the public
sector: How it is used. Springer.
 Vanhoucke, M., 2016. Earned Value Management. In Integrated Project Management
Sourcebook (pp. 199-250). Springer, Cham.
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