Implementation of New Cost Control Approach at NOVA Company

This project management assignment focuses on the implementation of a new cost control approach at NOVA Company. Part A provides a general overview, evaluating the relationships between project cost control and financial performance, key costs in project planning, the strengths of various cost estimation techniques (analogous, parametric, bottom-up, top-down, and three-point), cost methods and strategies for new projects, and steps to improve financial performance. Part B includes a Gantt chart illustrating the project schedule, and Part C outlines the budget creation process. The assignment explores direct and indirect costs, earned value management, cost baselines, and cost variance, offering insights into budget planning, resource allocation, and cost tracking to enhance financial outcomes. References are also provided.

Running head: PROJECT MANAGEMENT
Implementation of new cost control approach of the NOVA Company
Name of the Student:
Name of the University:

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Table of Contents
Part A: General Overview..........................................................................................................2
1.1 Evaluate the relationships between project cost control and project financial
performance............................................................................................................................2
1.2 Evaluate key costs at initial project planning stage of fashion project........................2
1.3 Explanation of key strength of different cost estimation techniques..........................3
1.4 Explanation of key cost methods and strategies to implement a new project.............5
1.5 Steps taken to improve financial performance of future projects at NOVA Company
6
Part B: Gantt chart......................................................................................................................7
Part C: Budget creation..............................................................................................................8
References................................................................................................................................12

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Part A: General Overview
1.1 Evaluate the relationships between project cost control and project financial
performance
Both financial budget as well as cost control comprised an estimation of project cost.
There is setting of agreed project budget as well as managing of forecasted cost against the
project budget. The financial performance of project is identified as planned project
expenditure. It is the cost baseline against the actual project expenditure as well as predicted
project cost for work efforts (Huang 2016). The financial performance of project is measured
for the project expenditures. Success in the project budget is based on reliable project budget.
Jayaraman (2016) stated that the financial performance is a measure in how well the business
uses its assets from primary mode of their business as well as produce business revenue. This
term is used in the project plan to measure financial health of the business over a certain
period of time.
The cost control is a way to manage contingency as well as management reserve of
the project plan. At the time of controlling the project cost, the project manager should focus
on original project budget, approved cost for the project, actual cost and committed cost.
Pheng (2018) mentioned that the project cost control is a practice to reduce the expenses of
the business to make an increase in business profits. The project manager compares actual
project results with budgeted expectations. When there is increase in actual project cost as
compared to planned cost, then the management is responsible to take project actions. Xie
(2016) discussed that the main benefit of cost control is lowering the entire project expenses.
It is also a key significant factor to maintain as well as grow business profitability.
1.2 Evaluate key costs at initial project planning stage of fashion project
The key costs at planning of a fashion project are:

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Direct cost: This cost is represented the cost of resources which have direct relation
with project plan. This cost includes labor and materials cost. The labor cost represents cost
of the project team those are involved in fashion project development work. The cost is
calculated based on hourly rate of the designer working in the project with 8 working hours
per day. Hiring of external project resources for the fashion project is also a labor cost
(Maylor 2010). Based on requirements of the project, materials needed to deliver designing
work is estimated as well as added to direct cost. The materials should be print the design,
cotton, wool, silk, leather, experimental fabrics and others. Direct cost also includes
commissions as well as manufacturing supplies.
Indirect cost: This type of cost is an expenditure which have no direct relation with
project plan such as renting an office, office equipment, meeting room and others (Hu, Cui
and Demeulemeester 2015). Consumption of assets of business is considered as indirect
project cost which are added to the budget of the project plan. Indirect cost also includes cost
of quality control, depreciation as well as insurance.
1.3 Explanation of key strength of different cost estimation techniques
Following are the project cost estimation techniques which are used in the project
development work such as:
Analogous estimation: Idri, azzahra Amazal and Abran (2015) stated that this cost
estimation technique is using historical data from same project to estimate project cost. Cost
estimate is adjusted for known project differences between the projects. The strength is that
this type of cost estimation used at initial phase of the plan but less accurate as compared to
other techniques. It estimates various project parameters as well as measure of scale.
Parametric estimation: Atia, Khalil and Mokhtar (2017) mentioned that parametric
estimation is using statistical model for developing the cost estimate. The strength is that it

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used historical data as key cost drivers for estimating cost as well as project duration. The
estimation is conducted rapidly and easier to replicate. It is also determined by classifying
unit cost or period as well as amount of units needed for the project tasks. There is higher
success rate of a project as this cost estimation technique is focused on past data of the
project. It is used to calculate effort as well as duration of individual project tasks.
Bottom up estimation: This cost estimation technique uses estimation of work
packages to determine total cost of the project plan. This technique is more accurate as
compared to other cost estimation methods as it is looking for cost from project management
perspective. It is involved with smaller project components and add the total cost of items to
determine overall cost estimation (Joshi 2018). This approach is used to estimate budget as
well as schedule and the project work is broken down in cost items to get total budget. The
strength of this technique is that it is based on detailed project analysis and support project
tracking. It estimates cost for low level project activities.
Top down estimation: The project cost is being measured by estimating how much
labor is required for a project work. The labor cost is multiplied by relevant project task. This
cost estimation approach is required history as well as knowledge of project cost to accurately
project estimation. The strength of top down estimation is that it is faster as well as easier as
compared to bottom up technique (Brook 2016). It requires minimal details of the project
plan to calculate the project cost.
Three point estimation: This technique uses three estimates for defining appropriate
value of the project cost activities like optimistic (Co), most likely (Cm) as well as
pessimistic (Cp). The cost for the project work is calculated using the formula: Cost estimate
= (Co+4*Cm + Cp) /6. The strength of this technique is that it helps to get probability

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distribution represents result of future events based on limited data (Densumite and
Muenchaisri 2017).
1.4 Explanation of key cost methods and strategies to implement a new project
The project cost methods for a new project are as follows:
Budget planning: The purpose of budget planning is to give a cost model for
determining how a project should perform financially. The project manager is responsible to
forecast the project income, expenditure as well as business profitability.
Earned value management: This cost management method helps the project manager
to present performance of the project plan. It is used to find project variances based on
comparing work performed as well as planned (Garvey, Book and Covert 2016). This process
is used to control schedule as well as cost and useful to forecast project cost.
Cost baseline: Mubarak (2015) discussed that the cost baseline is real construct which
can capture approved project budget distributed over the time period. It is useful to measure
actual cost and application over period. It is useful to control of performance to time is
satisfactory parameters.
Cost variance: This method shows financial performance of entire project work. It is
showing difference between budgeted cost and actual cost of performed project work.
The project cost strategies to implement a new project are as following:
Paying attention to initiation project planning: The project manager should pay
attention to initial planning of project. It is an essential component to reduce the cost
overruns. The project manager should assume all the cost items required for new project and
then calculate the cost. It is also required to determine scope of the project in advance (Kadri

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and Boctor 2018). Budget is calculated based on realistic scenarios of the project and defined
project scope.
Skills required for efficient cost management: The project manager should engage in
creative thinking which is required to manage the project cost. The possible skills required
are budget planning, identifying direct and indirect cost materials and cost tracking.
Reallocation of resources: In order to address cost of the project, the project manager
should allocate the resources to each individual project tasks. It is a useful strategy to keep
the project on estimated budget (Boctor and Kadri 2016).
Awareness and creativity: The core principle of efficient cost management is
creativity as well as awareness. The project manager should require to keep an eye on cost
and evaluate the project adjustments that can keep the plan on budget. The project manager
should be flexible to adapt project changes caused due to increase in return of investment.
Cost tracking: Kolisch et al. (2016) mentioned that cost tracking is involved to
examine each project phases and required project resources. The cost plan should contain cost
items based on project activities and contain contingency reserve. It includes materials,
hardware as well as software. Tracking of cost helps to decrease business expenses to rise in
income.
1.5 Steps taken to improve financial performance of future projects at NOVA
Company
Measurement of the project performance is determined if the project is on schedule as
well as in budget. Easiest way to track performance of project is using real time cost updates
of the project plan. There is required to review the cost baseline and approved project cost,
cost variances and percentage of work completion. Following are the steps required to make
financial performance improvement at future projects of NOVA Company:

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i. It should require to talk to the accountant and a business adviser about the
company’s finances. It will help to make improvement in cash flow (Maylor
2010).
ii. There should require to arrange a periodic payment plan for large business
expenses and switch to the insurance companies for proper business deals.
iii. Selling of unwanted business assets is a better way to get cash as well as
lessen storage cost. It will help the company to spread price over extended
period of time (Hu, Cui and Demeulemeester 2015).
Part B: Gantt chart
Mubarak (2015) stated that Gantt chart is the timeline of a project plan to identify
how the project is running. It is also helpful to track the project status and its progress with
respect to its planned time. In NOVA Company, the project schedule is based on
implementing a new cost control approach for the business. It views entire duration of the
project, expected start and end date of all individual project activities. From below image of
Gantt chart or project schedule, it is shown that the total duration of the cost control project is
60 days or 3 months. The critical tasks are also shown in the chart so that the senior project
officer can determine which tasks are critical for the project and prevent the work to be
completed on scheduled timeline. The start date of the project is 2nd March, 2020 and end
date is 26th May, 2020. The actual working days contain 5 days in a week and does not
include weekends. The public holidays are also no accepted as working days. Visual display
of the project schedule helps to manage the project work efficiently and track project progress
over specific period of time.

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Figure 1: Gantt chart
(Source: Created by author using Ms Project)
Part C: Budget creation
Garvey, Book and Covert (2016) discussed that the project budget is total amount of
monetary resources which are allocated for the project goals as well as objectives for specific
period of time. Huang (2016) argued that the project budget is estimated as well as controlled
the cost in approved budget so that the project goals are meet. The total budget for the NOVA
Company project is £300,000 is considered appropriate and sufficient by the Chief Financial
Officer. The total cost for the project contains consultant cost, travel, accommodation, new

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PC hardware, project cost control software, training cost and miscellaneous fixed costs. The
reports are shown based on resource cost overview, task cost overview and cash flow report.
Project
Activities
Cost
Identification of cost control practices £45,568.00
Detailed analysis of cost control improvement practices £52,080.00
Outline of the cost control initiatives £53,760.00
Detailed description of new cost control measures £16,700.00
Selection of cost control software solution £25,640.00
Proposal of cost control changes £17,600.00
Closure phase £88,588.00
Presentation phase £64.00

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£0.00
£10,000.00
£20,000.00
£30,000.00
£40,000.00
£50,000.00
£60,000.00
£70,000.00
£80,000.00
£90,000.00
£100,000.00
Actual Cost Remaining Cost Baseline Cost
Figure 2: Cost status report
(Source: Created by author using Ms Project)
Name Cost
Secretaries 1 £1,440.00
Secretaries 2 £1,200.00
Consultant 1 £50,400.00
Consultant 2 £50,400.00
Senior Project Officer £3,968.00

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Secretaries 1
Secretaries 2
Consultant 1
Consultant 2
Senior Project Officer
Consultant cost
Travel cost
New hardware and software
Accomodation cost
Fixed cost
Training cost£0.00
£20,000.00
£40,000.00
£60,000.00
£80,000.00
£100,000.00
£120,000.00
£140,000.00
£160,000.00
Figure 3: Resource cost
(Source: Created by author using Ms Project)
1 2
£0.00
£20,000.00
£40,000.00
£60,000.00
£80,000.00
£100,000.00
£120,000.00
£140,000.00
£160,000.00
£180,000.00
£200,000.00
£0.00
£50,000.00
£100,000.00
£150,000.00
£200,000.00
£250,000.00
£300,000.00
£350,000.00
Cost Cumulative Cost
Figure 4: Cash flow report
(Source: Created by author using Ms Project)