ch 4 pcost mgmt.ppt - Chapter 3: Project Cost Management...

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Chapter 3:Chapter 3:Project Cost ManagementProject Cost ManagementInformation Technology ProjectInformation Technology ProjectManagement,Management,Fifth EditionFifth Edition
Learning ObjectivesUnderstand the importance of project costmanagementExplain basic project cost managementprinciples, concepts, and termsDiscuss different types of cost estimates andmethods for preparing them2Information Technology Project Management, Fifth Edition, Copyright 2007
The Importance of Project CostManagementIT projects have a poor track record for meetingbudget goalsThe CHAOS studies found the average costoverrun(the additional percentage or dollaramount by which actual costs exceed estimates)ranged from 180 percent in 1994 to 43 percent in2002; other studies found overruns to be 33-34percent3Information Technology Project Management, Fifth Edition, Copyright 2007
What is Cost andProject Cost Management?Costis a resource sacrificed or foregone to achieve aspecific objective or something given up in exchangeCosts are usually measured in monetary units like dollarsProject cost managementincludes the processesrequired to ensure that the project is completed withinan approved budgetProject managers must make sure their projects are welldefined, have accurate time and cost estimates and havea realistic budget that they were involved in approving4Information Technology Project Management, Fifth Edition, Copyright 2007
Reasons for Cost OverrunsNot emphasizing the importance of realistic project costestimates from the outsetMany of the original cost estimates for IT projects are lowto begin with and based on very unclear projectrequirementsMany IT professionals think preparing cost estimates is ajob for accountants when in fact it is a very demandingand important skill that project managers need to acquireMany IT projects involve new technology or businessprocesses which involve untested products and inherentrisks5Information Technology Project Management, Fifth Edition, Copyright 2007
Project Cost Management ProcessesThere are three project cost managementprocesses:Cost estimating: developing an approximation orestimate of the costs of the resources needed tocomplete a projectCost budgeting: allocating the overall costestimate to individual work items to establish abaseline for measuring performanceCost control: controlling changes to the projectbudget6Information Technology Project Management, Fifth Edition, Copyright 2007
Project Cost Management SummaryInformation Technology Project Management, Fifth Edition, Copyright 20077
Basic Principles of Cost ManagementCash flow analysisdetermines the estimated annual costsand benefits for a project and the resulting annual cashflowToo many projects with high cash flow needs in the same yearmay not be able to be supported which will impact profitabilityTangible costsorbenefitsare those costs or benefits that

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Term
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Tags
Project Management, The Land, Project Cost Management, Information Technology Project, Technology Project Management

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