Information system project manager — Chapter vii. Project cost management

 The process of project cost management 
	 Through project cost management, try to control the actual cost of the project within the budget range . Ensure that projects are completed within a comparable budget .

One 、 Planning cost management

 Planning cost management ： The project cost structure has been formulated 、 Estimate 、 Standards of budget and control .

1、 Type of cost

• Variable cost ： With production 、 The cost that varies with workload or time is variable cost . Variable cost is also called variable cost . 
• fixed cost ： Not with production 、 Non recurring costs that change due to changes in workload or time are fixed costs . 
• Direct cost ： The cost directly attributable to the project work is the direct cost . Such as project team travel expenses 、 Wages 、 Fees for materials and equipment used in the project . 
• Indirect costs ： Expenses allocated to the project from the general management expense account or the project cost shared by several projects , It forms the indirect cost of the project , Such as tax 、 Additional benefits and security costs, etc . 
• Opportunity cost ： Is the use of a certain time or resources to produce a commodity , The lost opportunity to use these resources to produce other best alternatives is the opportunity cost , It generally refers to one of the biggest losses after making a choice . 
• Sunk cost ： It refers to what has happened due to past decisions , And costs that cannot be changed by any decision now or in the future . Sunk cost is a kind of historical cost , It's an uncontrollable cost to an existing decision , Will greatly affect people's behavior and decision-making , The interference of sunk cost should be eliminated in investment decision-making .

2、 Example cost management plan

Two 、 Estimated cost

 cost estimation ： The process of preparing an approximate estimate of the funds required to complete the project activities .

1、 There are three main steps in project cost estimation

1） Identify and analyze component accounts of project cost , That is, the category of resources or services included in the project cost , for example ： Labor cost 、 Material cost 、 Consulting fee, etc .
2） Accounts are formed according to the identified project cost , Estimate the cost size of each cost account .
3） Analyze the cost estimation results , Find various alternative costs , Coordinate the proportional relationship between various costs .

2、 Tool technology for cost estimation

2.1 Analogical estimation

 Analogy estimation method is also called “  Top down estimation ”.
	 The basic operation steps of this method are ：
		 First , The upper management personnel collect historical information about similar projects ;
		 secondly , Work with relevant cost experts to estimate the total cost of the current project ;
		 Again , Transfer the estimation results to the adjacent next level management personnel according to the hierarchy of the project work breakdown structure diagram , On this basis , They estimate the cost of their work and activities ;
		 Last , Continue to pass on their estimates to the next level of Management , Until the grass-roots personnel of the project .

	 Scope of application ： Previous projects for analogy are very similar in form and substance ; When the project information is difficult to obtain （ Little mastery of project details ）. 
	 advantage ： It's easy , Less time-consuming 、 Low cost  .
	 shortcoming （ limitations ）： Due to the uniqueness of the project , The estimation accuracy of this method may be low .

2.2 Parameter estimation method

 Parameter estimation is the use of historical data and other variables （ For example, the square meter cost during construction , Number of coding lines in software programming , Required man hours , Function point method in software project estimation, etc ） The statistical relationship between ,
 An estimation technique to calculate the cost of activity resources . The accuracy of this technical estimation depends on the complexity of the model and the amount of resources and cost data involved .

2.3 Reserve analysis

Emergency reserve

 Emergency reserve ： Many cost estimation experts are used to adding provisions or contingency reserves to the cost estimation of planned activities . Emergency reserve is the estimated cost freely used by the project manager , Used to deal with expected but uncertain events , These events are called “ Known unknown events ”, Is part of the project scope and cost baseline .

Manage reserves

 Manage reserves ： Planned for the future , But the budget reserved for possible cost changes . Not part of the cost benchmark , Used for processing “ Unknown unknown events ”.

The difference is shown in the table below

2.4 Bottom-up estimating

 Bottom-up estimating ： It is also called Bill of quantities . First, the cost of a single work package or activity is specified 、 Careful estimation ; Then report to the higher levels .
	 advantage ： detailed 、 accuracy .
	 shortcoming ： Time consuming 、 The cost of estimating itself is high .

2.5 quality cost

 quality cost ： Quality cost considerations and assumptions .
	 The cost of prevention ： Prevent non conformance （ train ）;
	 Evaluate costs ： The cost of evaluating to ensure compliance ;
	 rework （ Failure ） cost ： Rework and repair 、 guarantee .

	 The first two items are consistency costs .

2.6 Seller's bid analysis

 Seller's bid analysis ： According to the bidding situation of the qualified seller , Analyze project cost .

3、 Estimated cost output

3、 ... and 、 Budget making

 Cost budget ： Aggregate estimated costs for all individual activities or work packages , To establish a cost benchmark . 

1、 Comparison between cost estimate and cost budget

2、 Budget making — Tool technology

2.1 Cost summary

 explain ： The cost base includes contingency reserves but does not include management reserves ; The project budget includes management reserves .

2.2 Historical relations

 Historical relations ： There may be some historical relationships between relevant variables that can be used for parameter estimation or analogy estimation . Based on these historical relationships , Use project features （ Parameters ） To build a mathematical model , Forecast the total cost of the project .

2.3 Capital limit balance

 Capital limit balance ： Should be based on any restrictions on project funding , To balance capital expenditure . If you find a difference between the capital limit and the planned expenditure , The work schedule may need to be adjusted , To balance the level of capital expenditure . This can be achieved by adding mandatory dates to the project schedule .

3、 Output — Cost basis

 Cost baseline （ Also called cost benchmark ） It is a time phased budget used to measure and monitor project cost performance . Usually, the  S  Curve form display . When to plan how much to spend , It is the scale of cost in time . 
 A project （ Especially big projects ） There can be multiple cost benchmarks , To measure all aspects of project cost performance . For example, expenditure plan or cash flow forecast is the cost benchmark for measuring expenditure ; In large projects , Management may require the project manager to monitor internal costs separately （ artificial ） And external costs （ Contractor's cost ） wait , Multiple baselines can be set . 

3.1 Project cost budget table （ Cost basis ）

 explain ： Total project budget = Cost basis + Manage reserves 
      Total capital requirements = Cost basis + Manage reserves 
      The project budget and fund demand amount are equal , The former is S curve , The latter is ladder like .

Four 、 cost control

 cost control ： Monitor project status , To update project costs ： The process of managing cost baseline changes .

1、 cost control — Tool technology

1.1 Earned value management

 Earned value management ： It is a comprehensive range 、 Time 、 Methods of cost performance measurement . The workload will be planned 、 The actual cost is compared with the income of the actual earned value , Determine whether the cost and schedule are implemented as planned .

2、 Example of earned value calculation

1、 scene 
	 For general planning 10 Tianzhong 100 A tree , The completion budget is 10000 element ;
	 The specific plan is to plant... Every day 10 star , The budget for each tree is 100 element , Spend every day 1000 element ;

2、 Now it's number one 5 The day is over , Budget and implementation ：
	 According to the plan 50 A tree , Spending budget 5000 element ;
	 Actually planted 30 A tree , It actually cost 4500 element .

The term	explain	give an example
Completion budget BAC	Project completion budget （ Without management reserves ）	Planning use 10 Tianzhong 100 A tree , The completion budget is 10000 element
actual cost AC	Actual cost of work done	Actually planted 30 A tree , The actual cost 4500 element
Plan value PV	The planned value of the work to be done	The first 5 The day is over , According to the plan 50 A tree , Spending budget 5000 element
Earned value EV	The planned value of the work actually done （ Approved budget value of completed work ）	Planted 30 A tree , It is planned to cost =30*100 element =3000 element （ Actually planted 30 A tree , According to the plan, a tree costs 100 element ）
Schedule deviation SV	EV-PV： Less than 0, Behind schedule ; Greater than 0 Ahead of schedule	EV3000 element -PV5000 element , Less than 0, Behind schedule
Progress performance index SPI	EV/PV： Less than 1, backward ; Greater than 1, advance	3000/5000, Less than 1, Behind schedule
Cost deviation CV	EV-AC： Less than 0, Cost overruns ; Greater than 0, Cost savings	EV3000 element -AC4500 element , Less than 0, Cost overruns
Cost performance index CPI	EV/AC： Less than 1, Overspending ; Greater than 1, save	3000/4500, Less than 1, Cost overruns
to complete performance index TCPI	Achieve the efficiency to be maintained according to the plan ：TCPI=（BAC-EV）/（BAC-AC） The efficiency to be maintained by the current completion estimate ： TCPI=（BAC-EV）/（EAC-AC）	Greater than 1 Difficult to accomplish equals 1 Just finished less than 1 It's easy to do
ETC( Atypical )	The completion of the project needs to be estimated （ Atypical / Special circumstances of the original budget , It won't happen again , Just planting trees is not skilled , Not in the future ）：ETC=BAC-EV	ETC=10000-3000=7000
ETC （ A typical ）	The completion of the project needs to be estimated （ Typical , Not in special circumstances , There will always be , For example, the ground is hard to open Ken ）：ETC=（BAC-EV）/CPI	ETC=（10000-3000）/0.6667≈10499
ETC （ Dual effects ）	SPI and CPI At the same time influence ：ETC=（BAC- EV）/（CPI*SPI）, It can be set according to actual conditions SPI and CPI The weight of	ETC=(10000-3000）/（0.6667*0.6）≈17499
ETC （ re-calculate ）	ETC, There is something wrong with the estimate , Re estimate	There is a problem with the early estimation , Manual revaluation
EAC	Completion estimate ：EAC=AC+ETC Or a quick formula for typical cases ：{EAC=BAC/CPI}	EAC=4500+7000=11500（ According to the atypical situation ） ;EAC=4500+10499=14999（ As a typical case ）
Total completion time forecast	Supplementary knowledge ： Planned total construction period /SPI （ A typical ）; Atypical ： The actual construction period that has occurred + Planned remaining duration	The original planned construction period 10 Months , at present SPI by 0.5, Then the predicted completion period =10/0.5=20
VAC Deviation from completion	The difference between the completion budget and the new completion estimate ：VAC=BAC-EAC	VAC=BAC-EAC

 explain ：
	 The advantages of earned value technology ： If you only look at the budget and actual expenses , There seems to be no overspending , because AC4500 It seems less than PV5000, But in terms of scope , Actually, it's overspending ： Planted 30 A tree , According to the plan, it should take 3000 element , But it actually took 4500 element （EV<AC ）.
	 Three reference rules for Earned Value Management estimation  
		 There are three ways to estimate the implementation value of a work package （EV） The law of ： 
			0-100：  The most conservative . Only when it is completely completed will it be recorded as completed  .
			100-100： The most aggressive . As long as the work starts, it is recorded as done  .
			50-50： frequently-used . Remember to finish the work at the beginning  50%, Write it down after the work is finished  50%（ Another kind of view ： Remember to finish the work at the beginning  50%, Over work  50% Remember to complete ） .

Description of schedule deviation and cost deviation

 Less than is not a good thing （SV、CV Less than 0, or API、CPI Less than 1）： Behind schedule , Cost overruns 	
 Greater than is a good thing （SV、CV Greater than 0, or API、CPI Greater than 1）： Ahead of schedule , Cost savings 
 Is full of EV start