Friday, July 21, 2006

Chapter 5: Estimate project Times and Costs

Times and costs
are the important information, lead to the project successes. Project manager need to estimate project times and costs, help project team to understand schedule work, direction, how long of a project, how much of budgets, cash flow, progression, and support good decision, help upper managers or stakeholders to make decision to do this project, or not. Project managers need accurate times and cost. There are 2 approaches: top-down (macro) and bottom-up (micro) approaches. Which approach project manager will selected, up to project situation and level of detail or what are important criteria. Top-down estimate is used when estimate come from top manager, use when project is internal and small project, do not need detail, high uncertainly, and unstable scope. Bottom-up estimates come from relative and experience people in work package (project estimates should come from the people most knowledge about the estimate needed), need details, need accurate costs and times, and fixed-price contract. Bottom-up approach show the detail of time and cost in each work package. But we should to use both approaches together, make rough top-down estimates first, develop the WBS/OBS, make bottom-up estimates, develop schedules and budgets, and try to reconcile differences between top-down and bottom-up to reach accurately estimates. How to estimate project times and costs? Estimating guidelines: responsibility (people who are experienced and familiar with the task), brainstorming (use several people to share experience and knowledge, discussion, consensus, decrease errors), base on normal conditions, use consistent time units in task times, each task should be independent, beware allowances contingencies, and adding risk assessment to warning stakeholder. There are many methods to help project manager or project team to estimate times and costs. Method for estimating project tomes and costs, Macro approaches:- Consensus or brainstorming with expert people by uses a meeting where experts discuss, argue, and make a decision, Ratio method, Apportion, function point methods for software and system projects, and learning curves. Micro approaches: Parametric procedures applied to specific tasks, detailed estimates for the WBS Work packages, a hybrid: phase estimating. Project manager has to be carefully about excessive and insufficient detail because they make costly.
There are 3 types of costs: direct costs, project overhead costs, and general and administrative overhead costs.
- Direct costs: directly to a specific work package such as labor, materials, equipment, and other.
- Project overhead costs: directly tied to an identifiable project deliverable or work package such as salary of PM., temporary rental space,
- General and administrative overhead costs: organization costs indirectly linked to a specific package such as advertising, accounting, and upper manager above project level.
After get the times and costs estimates, project manager has to adjusting estimates, up to the risks, resources, and situation, contingency funds and time buffers, changing baseline schedule and budget. We have to develop and improve project all time by creating a database (saving historical data), collect estimate data and actual, provide a knowledge base for improving project time and costs estimating.

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