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7/26/2019 MP (Lect 05) -- Dr. Imam Baihaqi
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Estimating ProjectTimes and Costs
CHAPTER FIVE
Copyright 2011 by The McGraw-Hill Companies, Inc. llrights reser!e".
McGraw-Hill#Irwin
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Where We Are NowWhere We Are Now
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Estimating ProjectsEstimating Projects
EstimatingThe process of forecasting or approximating the time
and cost of completing project deliverables
The tas! of balancing expectations of sta!eholders
and need for control while the project is implemented T"pes of Estimates
Top#down $macro% estimates& analog"' gro(pconsens(s' or mathematical relationships
)ottom#(p $micro% estimates& estimates of elementsof the wor! brea!down str(ct(re
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Wh" Estimating Time and Cost Are *mportantWh" Estimating Time and Cost Are *mportant
EXHIBIT 5.1
To s(pport good decisions To sched(le wor!
To determine how long the project sho(ld ta!eand its cost
To determine whether the project is worth doing
To develop cash flow needs
To determine how well the project is progressing
To develop time#phased b(dgets and establish theproject baseline
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+actors *nfl(encing the ,(alit" of Estimates+actors *nfl(encing the ,(alit" of Estimates
,(alit" ofEstimates
Project-(ration
People
Project .tr(ct(reand /rgani0ation
PaddingEstimates
/rgani0ationC(lt(re
/ther$Nonproject%
+actors
Planning 1ori0on
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Estimating 2(idelines for Times'Estimating 2(idelines for Times'
Costs' and 3eso(rcesCosts' and 3eso(rces
4 1ave people familiar with the tas!s ma!e the estimate
5 6se several people to ma!e estimates
7 )ase estimates on normal conditions' efficient methods'and a normal level of reso(rces
8 6se consistent time (nits in estimating tas! times
9 Treat each tas! as independent' don:t aggregate
; -on:t ma!e allowances for contingencies
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Top#-own vers(s )ottom#6p EstimatingTop#-own vers(s )ottom#6p Estimating
Top#-own EstimatesAre (s(all" are derived from someone who (ses
experience and=or information to determine the projectd(ration and total cost
Are made b" top managers who have little !nowledgeof the processes (sed to complete the project
)ottom#6p Approach
Can serve as a chec! on cost elements in the W).b" rolling (p the wor! pac!ages and associated costacco(nts to major deliverables at the wor! pac!agelevel
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Top#-own vers(s )ottom#6p EstimatingTop#-own vers(s )ottom#6p Estimating
TABLE 5.1
Conditions for Preferring Top-Down or Botto-!pTie "nd Cost Esti"tes
Condition #"$ro Esti"tes #i$ro Esti"tes
%tr"tegi$ de$ision "&ing X
Cost "nd tie iport"nt X
Hig' !n$ert"int( X
Intern")* s")) pro+e$t X
Fi,ed-pri$e $ontr"$t X
C!stoer w"nts det"i)s X
nst")e s$ope X
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Estimating Projects& Preferred ApproachEstimating Projects& Preferred Approach
>a!e ro(gh top#down estimates
-evelop the W).=/).
>a!e bottom#(p estimates -evelop sched(les and b(dgets
3econcile differences between top#down
and bottom#(p estimates
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Top#-own Approaches for EstimatingTop#-own Approaches for Estimating
Project Times and CostsProject Times and Costs
Consens(s methods
3atio methods
Apportion method
+(nction point methods forsoftware and s"stem projects
?earning c(rves
Pro+e$t Esti"te
Ties
Costs
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Apportion >ethod of Allocating Project CostsApportion >ethod of Allocating Project Costs6sing the Wor! )rea!down .tr(ct(re6sing the Wor! )rea!down .tr(ct(re
FI/RE 5.1
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.implified )asic +(nction Point Co(nt Process.implified )asic +(nction Point Co(nt Processfor a Prospective Project or -eliverablefor a Prospective Project or -eliverable
TABLE 5.0
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Example& +(nction Point Co(nt >ethodExample& +(nction Point Co(nt >ethod
TABLE 5.
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)ottom#6p Approaches for Estimating)ottom#6p Approaches for Estimating
Project Times and CostsProject Times and Costs
Template methods
Parametric proced(res
applied to specific tas!s
3ange estimates forthe W). wor! pac!ages
Phase estimating& A h"brid
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.(pport Cost Estimate Wor!sheet.(pport Cost Estimate Wor!sheet
FI/RE 5.0
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Phase Estimating over Prod(ct ?ife C"clePhase Estimating over Prod(ct ?ife C"cle
FI/RE 5.
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Top#-own and )ottom#6p EstimatesTop#-own and )ottom#6p Estimates
FI/RE 5.2
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?evel of -etail?evel of -etail
?evel of detail is different fordifferent levels of management
?evel of detail in the W). varieswith the complexit" of the project
Excessive detail is costl"
+osters a foc(s on departmental o(tcomes
Creates (nprod(ctive paperwor!
*ns(fficient detail is costl"?ac! of foc(s on goals
Wasted effort on nonessential activities
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T"pes of CostsT"pes of Costs
-irect CostsCosts that are clearl" chargeableto a specific wor! pac!age
Labor, materials, equipment, and other
-irect $Project% /verhead CostsCosts inc(rred that are directl" tied to an identifiable
project deliverable or wor! pac!ageSalary, rents, supplies, specialized machinery
2eneral and Administrative /verhead Costs/rgani0ation costs indirectl" lin!ed to a specific
pac!age that are apportioned to the project
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Contract )id .(mmar" CostsContract )id .(mmar" Costs
FI/RE 5.5
-irect costs @B'BBB
-irect overhead @5B'BBB
Total direct costs @4BB'BBB
2A overhead $5BD% @5B'BBBTotal costs @45B'BBB
Profit $5BD% @58'BBB
Total bid @488'BBB
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Three iews of CostThree iews of Cost
FI/RE 5.3
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3efining Estimates3efining Estimates
3easons for Adj(sting Estimates*nteraction costs are hidden in estimates
Normal conditions do not appl"
Things go wrong on projects
Changes in project scope and plans
Adj(sting Estimates
Time and cost estimates of specific activities are
adj(sted as the ris!s' reso(rces' and sit(ationpartic(lars become more clearl" defined
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Creating a -atabase for EstimatingCreating a -atabase for Estimating
FI/RE 5.4
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Fe" TermsFe" Terms
Apportionent et'ods
Botto-!p esti"tes
Contingen$( f!nds
De)p'i et'od
Dire$t $osts
F!n$tion points
Le"rning $!res
6er'e"d $osts
P"dding esti"tes
P'"se esti"ting
R"nge esti"ting
R"tio et'ods
Tep)"te et'od
Tie "nd $ost d"t""ses
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W). +ig(reW). +ig(re
TABLE 5.2
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?earning C(rves 6nit al(es?earning C(rves 6nit al(es
TABLE A5.1
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?earning C(rves C(m(lative al(es?earning C(rves C(m(lative al(es
TABLE A5.0