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Tuesday, 20 December 2011

Project Cost Estimation and Control



Project Cost Estimation and Control:
The cost estimation of the project involves estimate costs and control costs.
The below tutorial provides the example of cost estimation, monitoring and forecasting for the project.
The effort estimation, over head costs, software's and hardware's cost are not covered.



1) Estimate Costs:
This means figuring out exactly how much you expect each work activity you are doing to cost. So each activity is estimated for its time and materials cost, and any other known factors that can be figured in.

Consider the example of developing the software for 10 weeks as a project.

The resource requirements, roles and the rate per hour are provided below, the resources are planned for 40 working hours/week. The Role/responsibilities and cost rate will vary depends on project:

Role Resource Names Resource Requirement Offshore Rate ($) On-shore Rate ($)
Technical Architect


1 35 70
Technical Lead


1 30 60
Business Analyst


1 30 60
Project Manager


1 35 70
Developers


5 25 50
QA Engineers


2 25 50
UI Designer


1 25 50
Build Manager


1 25 50
Technical Writer


1 25 50


Based on SDLC the effort is split-ted in as below. This will vary based on project:

Phases % Effort
Requirements
10
Design
15
Development
50
Testing and Bug-fix
20
Roll-out/Release
5
Total
100

The overall release phases for the project is given below:














Effort and Cost estimation Plan is provided below (Enlarge Image):





















2) Control Costs:
This just means tracking the actual work according to the budget to see if any adjustments need to be made.
Rules:
Lower = Loser
If CPI or SPI is below 1, then you’ve got trouble!
If CV or SV is negative, then you’ve got trouble!
VAC negative means you are running with over budget!

Effort and Cost estimation Actual is provided below for the completion of 6th week (Enlarge Image):
When you check the schedule on 6th week only 60% of work completed instead of 65%.




















The Schedule and Cost Matrix is provided blow which provides the status of the project and forecasting of the project (Enlarge Image):
















How’s the schedule looking? What do all these figures tell us?


The SPI is less than 1, The project is behind schedule.

How’s the budget looking? What do all these figures tell us?

The CPI is greater than one, The project is under budget.

How much will the project be over or under budget?

The VAC(+ve) is 8733$, means the project is under budget.









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