At the project level budgeting and resource planning

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Unformatted text preview: Material costs General and administrative costs Cost of money (i.e., interest payments, if applicable) Fee (if applicable) Contingency. When there is a cost cap or a fixed cost profile, there are additional logic gates that must be satisfied before the system engineer can complete the budgeting and planning process. A determination needs to be made whether the WBS and network schedule are feasible with respect to mandated cost caps and/or cost profiles. If not, the system engineer needs to recommend the best approaches for either stretching out a project (usually at an increase in the total cost), or descoping the project's goals and objectives, requirements, design, and/or implementation approach. (See sidebar on schedule slippage.) Whether a cost cap or fixed cost profile exists, it is important to control costs after they have been baselined. An important aspect of cost control is project cost and schedule status reporting and assessment, methods for which are discussed in Section 4.9.1 of this handbook. Another is cost and schedule risk planning, such as developing risk avoidance and work-around strategies. At the project level, budgeting and resource planning must also ensure that an adequate level of contingency funds are in To quickly assess the effect of a simple schedule slippage: • • • • • • • • Convert baseline budget plan from nominal (real-year) dollars to constant dollars Divide baseline budget plan into fixed and variable costs Enter schedule slip implementation Compute new variable costs including any work-free disruption costs Repeat last two steps until an acceptable implementation is achieved Compute new fixed costs Sum new fixed and variable costs Convert from constant dollars to nominal (real-year) dollars. cluded to deal with unforeseen events. Some risk management methods are discussed in Section 4.6. 4.6 Risk Management Risk management comprises purposeful thought to the sources, magnitude, and mitigation of risk, and actions directed toward its balanced reduction. As such, risk management is an integral part of project management, and contributes directly to the objectives of systems engineering. NASA policy objectives with regard to project risks are expressed in NMI 8070.4A, Risk Management Policy. These are to: NASA Systems Engineering Handbook Managemen...
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