Topic 1: Project Costs
How do you estimate project costs?
As you learned earlier, customers and stakeholders expect project managers to deliver a definitive and functional cost estimate in a timely manner. How do project managers do this? Good question. As you read, there are three levels of estimation in a project: the WAG, the SWAG, and the â€œyou bet your job on this figureâ€ estimates. Actually, they are referred to in industry as, the â€œOrder of Magnitudeâ€ the â€œBudget,â€ and the â€œDefinitiveâ€ cost estimates. The PMBOK addresses them under Analogous, Parametric, and Bottom-up estimates respectively Explain which of the three is used where in the project lifecycle.
Why should you know how to use EVM?
Project costs are monitored and controlled using a common technique called Earned Value Management (EVM).
Review the following figures below:
Project PV AC EV
A 10,000 11,000 10,000
B 9,000 8,000 7,000
C 8,000 8,000 8,000
D 7,000 7,000 5,000
Based on the Planned Values, Actual Costs, and Earned Values listed for Projects A, B, C, and D in the above table, how would you rank these four projects, from best- to worst-performing?