Cost ManagementVidit Desai Apurva Thakkar M Shajid Ali

Jigar Mehta

Introduction

Point to Ponder

Agenda• Team Members Introduction• Introduction to Cost Management• Role of Cost Management in Project Management• Importance of Cost in Project Management• Case Studies• Industries Most Successful in Project Management• Software for Cost/Project Management• Becoming an Expert • Conclusion

Introduction to Cost Management

Cost Management• Planning

• Establishing Policies, Procedures and Documentation

• Estimate• Rough Order of Magnitude (ROM) estimate - -50% to +200%.• Budgetary Estimate - -10% to +25%.• Definitive estimate - -5% to +10%.

• Determine Budget• Aggregating the estimated costs of individual activities or WP to establish cost baseline.

• Control Cost• Monitoring the status to update costs and managing changes to the cost baseline

Role of Cost Management in Project Management

Planning Cost Management• Inputs:

• Project Management Plan• Project Charter• Organizational process

• Process:• Meetings• Expert judgment• Analytical techniques

• Outputs:• Cost management plan

Estimating Cost Management• Inputs:

• Cost management plan• Scope baseline, project schedule• Organizational process assets

• Process:• Group decision making• Expert judgement, Vendor bid analysis• Analogous, parametric, Bottom-up estimating

• Outputs:• Activity cost estimates• Basis of estimates

Determine Budget• Inputs:

• Cost management plan• Project schedule• Risk register

• Process:• Funding limit reconciliation• Cost aggregation• Historical relationships

• Outputs:• Project funding requirements• Cost baseline

Control Cost• Inputs:

• Project management plan• Project funding requirements• Work performance data

• Process:• Earned value management• Reserve analysis• Project management software

• Outputs:• Work performance informance• Change requests

Importance of Cost in Project Management

Importance of Cost in Project Management

• Determinant Of Business Success.

• Focal Point In decision Making

• Measurement Of Performance.

• Advisory Role• Optimal Utilization Of

Resources

Case Studies

Case Study: Wrigley

• Smart use of financial resources.• Improved gross

margins and overall efficiency• Out Invested their

Competitors.

Case Study: Denver Airport Baggage System

• Underestimation of budget.

The project over budgeted 560M USD with a daily maintenance of 1M USD.• Had several variable costs

such as fuel cost and labor rates.

Case Study: Euro Tunnel

• Project cost was 13 billion USD, with a 80% going over budget after the completion.

• Financial Problems with optimistic revenue projections.

• Construction Cost Overruns.

Industries Most Successful in Project Management

Industries Most Successful in Project Management

Some of the most Project-intensive Industries• Manufacturing• Finance & Insurance• Information Services• Utilities• Business Services• Oil & Gas• Construction• Healthcare• Construction• Aerospace and Defense

Industries Most Successful in Project Management

Based on what the industry pay their Project Manager the rankings are• Consulting Industry• Natural Resource• Pharmaceuticals• Aerospace and Engineering • Healthcare• IT Industries

Software for Cost Management

Software for Cost/Project Management

• Vital part of ensuring a business remains efficient and profitable• When Selecting look at a variety of attributes

• Price• Ease of use• Suitability for the size of the business

• Cost Management Applications with focus on cost at the project level• Project Management Application with measure of Cost Management• Cost Management Software for Business as a whole with Integration with

Project Management Software.

Software for Cost/Project Management

• aPriori• enterprise-level cost management solutions for businesses in the

manufacturing industry• software’s analytical capabilities highlights cost savings in

material and labor• Unique feature 3-D CAD modeling that facilitates the cost analysis

Software for Cost/Project Management

• Price Systems TruePlanning• For companies producing software products or information technology

solutions• Cost management software that focuses on the process of cost estimating and

analysis• Uses algorithms that leverage real-world project experience derived from

more than 11,000 projects over the past 30 years• Tools necessary to predict and ultimately manage costs• Modules for bid and proposal generation as well as vendor selection

management

Software for Cost/Project Management

• Microsoft Project• Smaller businesses can’t afford a larger enterprise level cost management

software• Primarily focused on project management• Still provides a large measure of cost estimating and management

functionality • Integrates seamlessly with Microsoft Office Suite • As well as other popular small business accounting App • Provides Cost Management at low cost for small Business.

Becoming an Expert

Certification

Project Management• PMI Certification• Project Management

Professional• Portfolio Management

Professional• PMI Professional in Business

Analysis

Cost Management• Certified Management

Accountant (CMA)• Certified Cost Professional

(CCP)• Certified Estimating

Professional (CEP)

Warren Buffett• Logical Investor• Risk Seeker• Effective Decision Maker• Visionary• Capitalist

Conclusion

Mangalyaan – A Success Story

• Most cost effective project to Mars

• Cost = 11% NASA’s MAVEN Mars Orbiter

• Mangalyaan cost = $74 Million

• MAVEN cost = $672 Million

Mangalyaan – Cost Management

• In house part production• Timing of the project• Time = Cost • Excellent Scope and time

Management also.

Thank You