06 project planning -budgeting
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Principles of Project Management
Hisham Rafik, MBA, PMPPresented By:
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Principles of Project Management 2© Knowledge 2008
Course Outline1. Project Management Framework
2. Project Initiation
3. Project Planning - Scope Definition
4. Project Planning - Schedule Development5. Project Planning - Risk Management
6. Project Planning - Budgeting
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Principles of Project Management 3© Knowledge 2008
Section Six
Project Planning Budgeting
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Principles of Project Management 4© Knowledge 2008
Project Planning Process
Scope Definition
Schedule Development
Risk Management Plan
Budgeting
Plan Compilation and Approvals
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Principles of Project Management 5© Knowledge 2008
The Profit Equation
Revenue Set by sales
- Costs PM responsibility
Profits Company Target
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Principles of Project Management 6© Knowledge 2008
Types of Cost Direct costs
1. Fixed costs2. Variable costs
3. Other project-related costs
Indirect costs
General & Admin (G&A)
Marketing & Sales (M&S) Research and Development (R&D)
COGS = Cost Of Goods Sold
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Principles of Project Management 7© Knowledge 2008
Direct Costs1. Fixed Costs (Task independent)
Initial Costs Project office setup costs Project insurance Project financing
Costs incurred across the whole project duration PM & all fixed resources
Depreciation of fixed assets Rentals
Allocated project contingency/risk reserve
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Principles of Project Management 8© Knowledge 2008
Direct Costs2. Variable costs (Task dependant)
Manpower
Own resources:
Use Fully loaded rates to accommodate othercosts needed/utilized by your team:
Salaries + benefits + computer + office +
training + company car + …
Outsourced labor:
Extra costs for utilization of resources
computer + office space + training
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Principles of Project Management 9© Knowledge 2008
Direct Costs2. Variable Costs (continued)
Subcontractors Turn-key services (might include equipment/material
supplies)
Materials Equipment sold in the project and constitute a part
of the final product/deliverable
Turn-key Equipment SuppliesMaterial consumed in the project
MachinesDepreciation of temporarily used Company assetsRentals of tools used upon need
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Principles of Project Management 10© Knowledge 2008
Direct Costs3. Other project-related costs
Warehousing
Customs and custom clearance
Some task-specific insurances
Transportation
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Principles of Project Management 11© Knowledge 2008
Indirect costs General & Admin (G&A)
HR, CFO, Supply Chain, Administration
Marketing & Sales (M&S)
Research and Development (R&D)
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Principles of Project Management 12© Knowledge 2008
Planning
7.1 Cost Estimating
7.2 Cost Budgeting
Controlling7.3 Cost Control
Process Orientation
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Principles of Project Management 13© Knowledge 2008
Process of developing an approximation (or estimate) of the
cost of the resources needed to complete each the scheduleactivity.
Difference between cost estimating and pricing: Cost estimating: Assessing how much it will cost the organization to
provide the product or service
Pricing : Assessing how much the organization will charge for theproduct or service
Cost Estimating
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Principles of Project Management 14© Knowledge 2008
Inputs1.Enterprise environmental
factors2.Organizational Process
Assets
3.Project Scope
Statement4.WBS
5.WBS Dictionary
6.Project Management Plan• Schedule
management plan
• Staffing
management plan• Risk register
Tools&Techniques
1. Analogous Estimating2. Determine Resource
Cost Rate
3. Bottom-up Estimating
4. Parametric Estimating5. Project Management
Software
6. Vendor bid analysis
7. Reserve analysis
8. Cost of Quality
Outputs1. Activity Cost
estimates
2. Activity Costestimates Supportingdetail
3. Requested Changes
4. Cost management
plan (updates)
Cost Estimating
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Principles of Project Management 15© Knowledge 2008
1. Enterprise environmental factors
Marketplace conditions Commercial database
2. Organizational Process Assets
Cost estimating policies Cost estimating templates
Historical information
Project files Project team knowledge
Lessons learned
Cost Estimating, Inputs
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Principles of Project Management 16© Knowledge 2008
1. Analogous estimating (Expert judgment)Used to estimate total project costs if there is a limited
amount of detailed information
2. Bottom-up estimating
Estimating the cost of individual work items and thenrolling up the costs to arrive at a project total
3. Parametric estimating
Using project characteristics (or parameters) in amathematical model to predict costs (e.g., price per squarefoot)
Cost Estimating, Tools & Techniques
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Principles of Project Management 18© Knowledge 2008
2. Supporting detail
Description of estimated scope of work
Documentation of the basis for the estimate
Documentation of any assumptions made An indication of the range of possible results
3. Requested changes4. Cost management plan (updates)
Cost Estimating, Output
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Principles of Project Management 19© Knowledge 2008
Aggregating the estimated cost of the
individual schedule activities or work
packages, to establish a total cost baseline
for measuring project performance
Cost Budgeting
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Principles of Project Management 20© Knowledge 2008
Inputs
1. Project scopestatement
2. WBS
3. WBS dictionary
4. Activity cost estimates
5. Activity costestimatessupporting details
6. Project schedule
7. Resource calendars
8. Contract
9. Cost managementplan
Tools&Techniques
1. Costaggregation
2. Reserve analysis
3. Parametricestimating
4. Funding limitedreconciliation
Outputs
1. Cost baseline2. Project funding
requirements
3. Cost management
plan (updates)4. Requested changes
Cost Budgeting
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Principles of Project Management 21© Knowledge 2008
1. Cost baselineTime phased budget that will be used as a
basis against which to measure, monitor
and control the overall cost performance
on the project
Cost Budgeting, Outputs
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