SPM ASSIGNMENT NO.

Q: Define project cost management. Describe the process of cost management?

Ans: According to (Project Management Institute, 1996).Project Cost Management includes the processes required to ensure that the project is completed within the approved budget and is primarily concerned with the cost of the resources needed to complete project activities

In IT project cost management it is critical to estimate cost of software development, salary of IT staff and developers. Effective project cost management allows each project to be specific and unique because that project entails costs and requires specific funding. project cost management process consists of the three key steps.

Project Cost Management Process

The knowledge area of Project Cost Management consists of the following processes –

Project Cost Processes

Process Project Phase Key Deliverables

Estimate Costs Planning Activity Cost Estimates, Basis of estimates

Determine Budget Planning Cost performance baseline

Control Costs Monitoring and Controlling Work performance measurements

The process of managing project costs is an activity for estimating costs, developing project budget and controlling spending. The project cost management process includes the following key steps:

Project Cost Estimation .

It is the project cost management process step when the project manager cooperates with the financial department to estimate costs required for purchasing all necessary good/services and undertaking necessary activities to deliver the project. Project Cost Estimation is conducted at the planning phase. The project manager uses project cost management software to develop spreadsheets and make calculations.

Project Budget Determination.

At this step, cost spreadsheets are used to develop the budget framework and determine the budget. The project manager can use project cost management software to work in collaboration with the financial department to determine items of the budget and sources of funding and then to allocate the budget. The step entails close cooperation with the project sponsor.

Project Spending Control .

It is the step when the allocated budget is reviewed and spending is tracked. The project manager takes responsibility for control spending and to ensure that the budget allocation is optimized and costs are fully covered with the planned and allocated budget.

Q: Describe resource allocation, resource leveling?

Ans: A resource is any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit from it. Resources (typically human) are assigned to tasks, deliverables and milestones that need to be executed.

Resource allocation is used to assign the available resources in an economic way. It is part of resource management. In project management, resource allocation is the scheduling of activities and the resources required by those activities while taking into consideration both the resource availability and the project time.

Why Resource Allocation is Important

Over allocation is most likely to occur when there are multiple projects in a company or when software is used to allocate tasks to resources. Over allocation puts unreasonable pressure on resources and can be costly not only in overtime monies but in resource burnout.

Resource Leveling

Resource leveling is the process that ensures resource demand does not exceed resource availability. The ideal scenario would be a build up of resource usage at the beginning of the project and a reduction at the end of the project. However, the approach to resource leveling will also depend on whether resources are dedicated to a particular project or shared across several projects and whether there is a need to keep all resources fully utilized.

Resource leveling can be accomplished more easily if resource requirements to complete an activity are expressed in terms of hours or days required. In practice, however, there is a limit to the number of resources that can be deployed and, therefore, a limit to the amount by which any activity duration can be shortened.

Generally, there are two approaches to leveling and smoothing the resources required:

Time-limited resource considerationsIn this case emphasis will be placed on completing the project within a specified time. This time will usually have been determined by network analysis.

Resource-limited resource considerationsIn this case the project must be completed with the resources available even if this means extending the project duration. If the total resource demand exceeds the resource availability at any time then some of the activities must be delayed until there is sufficient resource availability.

Q: Describe in brief PERT technique and critical part analysis used for project scheduling.?

Ans: Critical Path Analysis and PERT are powerful tools that help you to schedule and manage complex projects. They were developed in the 1950s to control large defense projects, and have been used routinely since then.

The Framework for PERT and CPM

Essentially, there are six steps which are common to both the techniques. The procedure is listed below:

1. Define the Project and all of it’s significant activities or tasks. The Project (made up of several tasks) should have only a single start activity and a single finish activity.

2. Develop the relationships among the activities. Decide which activities must precede and which must follow others.

3. Draw the "Network" connecting all the activities. Each Activity should have unique event numbers. Dummy arrows are used where required to avoid giving the same numbering to two activities.

4. Assign time and/or cost estimates to each activity5. Compute the longest time path through the network. This is called the critical

path.6. Use the Network to help plan, schedule, monitor and control the project.

Drawing a Critical Path Analysis Chart:

Use the following steps to draw a CPA Chart:

Step1. List all activities in the plan

For each activity, show the earliest start date, estimated length of time it will take, and whether it is parallel or sequential. If tasks are sequential, show which stage they depend on.

Step2. Plot the activities as a circle and arrow diagram

Critical Path Analyses are presented using circle and arrow diagrams.

In these, circles show events within the project, such as the start and finish of tasks. The number shown in the left hand half of the circle allows you to identify each one easily. Circles are sometimes known as nodes.

An arrow running between two event circles shows the activity needed to complete that task. A description of the task is written underneath the arrow. The length of the task is shown above it. By convention, all arrows run left to right. Arrows are also sometimes called arcs.

An example of a very simple diagram is shown below:

Where one activity cannot start until another has been completed, we start the arrow for the dependent activity at the completion event circle of the previous activity. An example of this is shown below:

Here the activities of 'Select Hardware' and 'Core Module Analysis' cannot be started until 'High Level Analysis' has been completed. This diagram also brings out a number of other important points:

Within Critical Path Analysis, we refer to activities by the numbers in the circles at each end. For example, the task 'Core Module Analysis' would be called activity 2 to 3. 'Select Hardware' would be activity 2 to 9.

Activities are not drawn to scale. In the diagram above, activities are 1 week long, 2 weeks long, and 1 day long. Arrows in this case are all the same length.

In the example above, you can see a second number in the top, right hand quadrant of each circle. This shows the earliest start time for the following activity. It is conventional to start at 0. Here units are whole weeks.

PERT (Program Evaluation and Review Technique)

PERT is a variation on Critical Path Analysis that takes a slightly more skeptical view of time estimates made for each project stage. To use it, estimate the shortest possible time each activity will take, the most likely length of time, and the longest time that might be taken if the activity takes longer than expected.

Use the formula below to calculate the time to use for each project stage:

shortest time + 4 x likely time + longest time-----------------------------------------------------------

6

This helps to bias time estimates away from the unrealistically short time-scales normally assumed.