Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project: Direct Costs
These costs are on account with a specific work package. Direct costs are attributed to efforts made by the project manager, project team, and folks executing the work package. These costs signify actual outflow and are compensated as the project evolves. Examples of direct costs are labor, equipment, materials, and other (Gray & Larson, 2005). Direct Overhead Costs
Direct overhead rates represent which resources are being used in a project. Direct overhead costs relate to project deliverables. An example is the salary of the project manager or the rental of a project workspace. While overhead is not an immediate expense, it must be remunerated (Gray & Larson, 2005). General and Administrative (G&A) Overhead Costs
These costs are not straightforwardly associated to a project. Examples include organization costs such as advertising or accounting. G&A costs are generally billed as a percent of total costs, or items such as labor, materials, or equipment. Using the sums of direct and overhead costs for work packages, it is possible to cumulate the costs for any deliverable for the entire project (Gray & Larson, 2005). Figure 1. Primary Data Sets Used by the Team to Determine the Budget Type
Cost of the Software
Depreciation can be taken. G&A Cost
Training for 12 users. Training time is 2 days per person.
In-House Training Support
Administrative Costs for 2 vendors in house
2800 Total Training Costs
Equipment and Material Costs
Purchase of three servers and backup software
Average salary = $91
At the beginning of any project, a project manager along with the management team will create an estimate of time and costs, which will lead to the initial approved budget amount. As most project managers know, "Past experience is a good starting point for developing team and cost estimates." (Gray, et al 2005) A good rule of thumb with any estimates is that a manager should aim to have a 95% or more probability of meeting both time and cost estimates. Many factors present can influence the accuracy of the team's estimates.
The first factor that may present itself is the "planning horizon." This idea means "
estimates of current events are 100 percent accurate but are reduced more for distant events." (Gray, et al 2005) By planning a project closest to the launch date, the project manager can create estimates that are more accurate based on available resources and realistic time constraints. Another factor that contributes to the planning horizon is the project duration. Since this project involves setting up a new technology, this can affect the accuracy of initial estimates. The project duration may change dramatically if the new technology takes longer to install or train new users. "Sometimes poorly written scope specifications for new technology result in...
References: Department of Justice Management Division Information Technology Investment Management Process. Introduction to Risk Management. http://www.rongarlow.com/ITIM/Risk/risk.htm
Gray, C.F. & Larson, E.W. (2005). Project Management: The Managerial Process (3rd ed.). The
McGraw-Hill Companies: New York.
Leach, Larry P. Critical Chain Project Management Improves Project Performance. Advanced Projects, Inc. 1997-2004. http://www.advanced-projects.com/CCPM/Papers/PMJOURN_R8.PDF#search= 'constraints%20in%20project%20management '
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