Chapter 7 - CIT 263B Project Management

Reserves

Dollar amounts included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict.

FTE

Full Time Equivalent

Sunk Costs

Money spent in the past.

PERT

Program Evaluation and Review Technique

RF&B

Room Food & Beverage

Heuristics

Rules of thumb, standards.

Control Account =

Task

Cost Variance

The earned value, minus the actual cost.

Life Cycle Costing

The total cost of ownership, or development plus support costs, for a project.

3 Point Estimate

Three Point Estimates involve estimating the most likely, optimistic, and pessimistic costs for items.

T & E

Travel & Entertainment

Cash Flow Analysis

a method for determining the estimated annual costs and benefits for a project and the resulting annual cash flow.

Management Reserves

allow for future situations that are unpredictable, unknown unknowns. Example: If an employee/PM gets sick for two weeks, management reserve could be set aside to cover the resulting costs. NOT INCLUDED in a cost baseline.

Contingency Reserves

allow for future situations that may be partially planned for known unknowns and ARE INCLUDED in the project cost baseline.

Planned Value (PV)

also called the budget, is the portion of the approved total cost estimate planned to be spent on an activity during a given period.

Estimate at Completion (EAC)

an estimated cost of completing a project based on performance to date.

Black Swan

an event that is extremely hard to predict, is significant in magnitude, and is often inappropriately rationalized with the benefit of hindsight. Unknown Unknown

Earned Value (EV)

is an estimate of the value of the physical work actually completed. EV is based on the original planed costs for the project or activity and the rate at which the team is completing work on the project or activity to data.

Cost Variance (CV)

is the earned value minus the actual cost. If cost variance is a negative number, it means that performing the work cost more than planned. If cost variance is a positive number, performing the work cost less than planned.

Rate of Performance (RP)

is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity.

Cost Performance Index (CPI)

is the ratio of earned value to actual cost, it can be used to estimate the projected cost of completing the project. If the CPI is equal to 1 or 100 percent, then the planned and actual costs are as budgeted.

Definitive Estimate

provides an accurate estimate of project costs. -5% to 10%. Later in the project, less than 1 year out. Provides details for purchases, estimates, actual costs.

Rough Order of Magnitude (ROM) Estimate

provides an estimate of what a project will cost. -50% to 100% accurate. Guesstimate, Ball Park Estimate. Done very early or before a project has started. Provides estimate of cost for selection decisions.

Profits

revenues minus expenses

Learning Curve Theory

states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced.

Overrun

the additional dollar amounts by which actual costs exceed estimates.

Baseline

the approved project management plan plus approved changes.

Budget at Completion

the original total budget for the project.

Schedule Performance Index (SPI)

the ratio of earned value to planned value, it can be used to estimate the projected time to complete the project.

Actual Cost (AC)

the total direct and indirect costs incurred in accomplishing work on an activity during a given period. Example: suppose that it actually took two weeks and cost 20,000 to purchase and install the new Web server. Assume that 15,000 of these actual costs were incurred during Week 1 and 5000 was incurred during Week 2. These amounts are actual cost for the activity each week.

Budgetary Estimate

used to allocate money into an organization's budget. -10% to 25% accurate. Made one or two years before a project's completion. Puts dollars in the budget plans.

Schedule Variance (SV)

- is the earned value minus the planned value. A negative schedule variance means that it took longer than planned to perform the work, a positive schedule variance means that the work took less time than planned to perform.

Bottom Up Approach

A cost estimating technique based on estimating individual work items and summing them to get a project total.

Analogous Estimates (Top down Estimate)

A cost estimating technique that uses the actual cost of a previous similar project as the basis for estimating the cost of the current project.

Work Package

A task at the lowest level of the WBS.

Cost Baseline

A time-phased budget that PMs Use to measure and monitor cost performance.

______ drive the numbers!

Assumptions

COGS

Cost Of Goods Sold

Tangible Costs

Costs that can be easily measured in dollars.