Principles of Project Management

Presented By:

Hisham Rafik, MBA, PMP

Course Outline
1. 2. 3. 4. 5. 6. Project Management Framework Project Initiation Project Planning - Scope Definition Project Planning - Schedule Development Project Planning - Risk Management Project Planning - Budgeting

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Principles of Project Management

Section Six
Project Planning Budgeting

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Project Planning Process

Scope Definition Schedule Development Risk Management Plan Budgeting Plan Compilation and Approvals

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The Profit Equation

Revenue Costs Profits Set by sales PM responsibility Company Target

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Types of Cost
Direct costs
1. 2. 3. Fixed costs Variable costs Other project-related costs

COGS = Cost Of Goods Sold

Indirect costs
General & Admin (G&A) Marketing & Sales (M&S) Research and Development (R&D)

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Direct Costs
1. 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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Direct Costs
2. Variable costs (Task dependant)

Manpower
Own resources:
Use Fully loaded rates to accommodate other costs 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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Direct Costs
2. 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 Supplies Material consumed in the project Machines Depreciation of temporarily used Company assets Rentals of tools used upon need
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Direct Costs
3. Other project-related costs
Warehousing Customs and custom clearance Some task-specific insurances Transportation

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Indirect costs
General & Admin (G&A)
HR, CFO, Supply Chain, Administration

Marketing & Sales (M&S) Research and Development (R&D)

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Process Orientation
Planning
7.1 Cost Estimating 7.2 Cost Budgeting

Controlling
7.3 Cost Control

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Cost Estimating
Process of developing an approximation (or estimate) of the cost of the resources needed to complete each the schedule activity.
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 the
product or service

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Cost Estimating
Inputs
1. Enterprise environmental factors 2.Organizational Process Assets 3.Project Scope Statement 4.WBS 5.WBS Dictionary 6.Project Management Plan Schedule management plan Staffing management plan Risk register
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Tools &Techniques
1. Analogous Estimating 2. Determine Resource Cost Rate 3. Bottom-up Estimating 4. Parametric Estimating 5. Project Management Software 6. Vendor bid analysis 7. Reserve analysis 8. Cost of Quality

1. Activity Cost estimates

Outputs

2. Activity Cost estimates Supporting detail 3. Requested Changes 4. Cost management plan (updates)

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Cost Estimating, Inputs

1.

2.

Enterprise environmental factors Marketplace conditions Commercial database Organizational Process Assets Cost estimating policies Cost estimating templates Historical information Project files Project team knowledge Lessons learned
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Cost Estimating, Tools & Techniques

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 then rolling up the costs to arrive at a project total

3. Parametric estimating
Using project characteristics (or parameters) in a mathematical model to predict costs (e.g., price per square foot)
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Cost Estimating, Outputs

1. Cost estimates:
Quantitative assessments of the cost of resources (e.g., units of currency or staff hours)
- Types of estimates Order of magnitude (-50% to + 100%) from actual - used during the initiating process Budget estimate (-25% to + 70%) Definitive estimate (-10% to + 15%) from actual used in a later stage
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Cost Estimating, Output

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 changes 4. Cost management plan (updates)

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Cost Budgeting
Aggregating individual the estimated cost or of the work schedule activities

packages, to establish a total cost baseline for measuring project performance

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Cost Budgeting
Inputs
1. Project scope statement 2. WBS 3. WBS dictionary
4. Activity cost estimates

Tools &Techniques
1. Cost aggregation 2. Reserve analysis 3. Parametric estimating 4. Funding limited reconciliation

Outputs
1. Cost baseline 2. Project funding requirements
3. Cost management plan (updates) 4. Requested changes

5. Activity cost estimates supporting details 6. Project schedule 7. Resource calendars 8. Contract 9. Cost management plan
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Cost Budgeting, Outputs

1.

Cost baseline
Time phased budget that will be used as a basis against which to measure, monitor and control the overall cost performance on the project

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Thank You

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