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Chapter 7 - Defining the project budget and risk plans
Terms in this set (36)
cost estimating techniques
analogous (top down)
analogous estimating - top down
approximates the cost of the project at a high level by using a similar past project as a basis for the estimate.
uses historical data from past projects along with expert judgement
not used to estimate individual work packages
least accurate, least costly
best technique early in project
uses a mathematical model to compute costs, and it most often uses the quantity of work multiplied by the rate. Also, commercial parametric modeling packages are available for complex projects or those performed within specialized industries.
multiply the quantity x rate
bottom up estimating
most accurate, time consuming
A method of estimating project duration or cost by aggregating the estimates of the lower-level components of the work breakdown structure (WBS).
need the rate for each resource
3 point estimating
an average of the most likely estimate, the optimistic estimate, and the pessimistic estimate.
A rate used for cost estimating of human resources that includes a percentage of the salary to cover employee benefits, such as medical, disability, or pension plans.
budgeting and cost baseline
done after cost estimates are complete
the process of aggregating all the cost estimates and establishing a cost baseline for the project. The cost baseline is the total expected cost for the project
get project sponsors approval then create cost baseline
a certain amount of money set aside to cover costs resulting from possible adverse events or unexpected issues on the project. These costs may come about for many reasons, including scope creep, risks, change requests, variances in estimates, cost overruns,
an amount set aside by upper management to cover future situations that can't be predicted. As with the contingency reserve, the amount of a management reserve is typically based on a percentage of the total project cost.
includes measuring the project spending to date, determining the burn rate (or how fast you're going through the money), and tracking expenditures to the cost baseline so that stakeholders can see what was planned versus what was actually spent on the project
use expenditure reporting - pie charts, bar charts & budgets broken down by work components
Earned Value Measurement - EVM & cost variance
The three measurements needed to perform earned value measurement are planned value (PV), actual cost (AC), and earned value (EV).
cost variance and schedule variance are efficiency indicators
planned value - PV
cost of work budgeted for a specific schedule activity during a phase
planned value (PV)= budget at completion (BAC) * percent complete (PC)
PV = PC * BAC
actual cost - AC
cost spent on a project in a given period of time
earned value - EV
percentage of work completed to date compared to budget
earned value = percentage of work completed * budget at completion
round up or down answer to whole number
EV = PWC * BAC
compares an activity's actual progress to date to the estimated progress and is represented in terms of cost.
negative variance = project is behind schedule
positive variance = project is ahead of schedule
SV = EV - PV
cost performance index CPI
measures the value of the work completed at the measurement date against the actual cost. It is one of the most important EVM measurements because it tells you the cost efficiency for the work completed to date or at the completion of the project.
if CPI is greater than 1, you are spending less - good
if CPI is less than 1, you are spending more - bad
CPI = EV/AC - move decimal over 2 places right - include 2 places after decimal
use to calculate burn rate
the rate at which a company is spending its capital until it reaches profitability
Estimate to complete (ETC) formula
burn rate greater than 1 - overbudget
burn rate less than 1 - underbudget
burn rate = 1 on budget
burn rate = AC/EV
schedule performance index - SPI
measures value of progress of work to date vs. planned
SPI - EV/PV
To completion performance index - CPI
total of what you've spent and what you extimate to completion
if 1 then continue
if greater than 1 try harder
if less than 1 easier
TCPI = (BAC-EV)/(BAC-AC)
Balance Score Card (BSC)
adds non financial metrics
strengths, weaknesses, opportunities, threats
strengths - maintain, build and/or leverage
weaknesses - fix or abandon
opportunities - prioritize optimize
threats - counter
what is a risk
a potential future event that can have either negative or positive impacts on the project.
what is risk planning
identify the risk
analyze the impact of the risk
develop appropriate response for risk with greatest probability and impat
the process of determining and documenting the potential risks that could occur on your project.
Budgets or funding
what to include in risk register
includes an identification number, risk name, risk description, risk owner, risk score and response plan (or where the response plan can be located
the process of identifying those risks that have the greatest possibility of occurring and the greatest impact to the project if they do occur.
risk probability and impact matrix
to prioritize and quantify risks
the likelihood that a risk event will occur, expressed as a number from 0.0 to 1.0.
1.0 absolute certainty the risk event will occur
the consequence (or opportunity) the risk poses to the project if it occurs
high, medium, low
how to handle a risk
strategies to deal with negative risks
Avoid: Avoiding the risk altogether or eliminating the cause of the risk event
Transfer: Moving the liability for the risk to a third party by purchasing insurance, performance bonds, and so on
Mitigate: Reducing the impact or the probability of the risk
Accept: Choosing to accept the consequences of the risk
strategies to deal with positive risks
Exploit: Looking for opportunities to take advantage of positive impacts
Share: Assigning the risk to a third party who is best able to bring about the opportunity
Enhance: Monitoring the probability or impact of the risk event to assure benefits are realized
Accept: Choosing to accept the consequences of the risk
when to monitor risks
during the Execution, Monitoring and Controlling phases
symptoms or signs that a risk event is about to occur
cost estimating is/are
inputs to project budged and used to determine total project cost
depends on technique used to determine estimate
provided by team members
performed after schedule is created
comparing CPI cost performance index and SPI schedule performance index
when both the CPI and SPI are less than 1, the project is over planned cost and behind schedule.
when both the CPI and SPI are greater than 1, the project is under planned cost and ahead of schedule.
when the CPI is less than 1 and the SPI is greater than 1, the project is over planned cost and ahead of schedule.
when the CPI is greater than 1 and the SPI is less than 1, it indicates that the project is under planned cost and behind the schedule
OTHER SETS BY THIS CREATOR
Chapter 10 - Project tools and documentation
Chapter 9 Agile - processing change requests and p…
Chapter 8 Communicating the plan
Chapter 6 Determining Resource Needs