Budgeting the Project 4-1 Budget

4-2 Homework #17  Overview  Approaches for gather data  Budgeting & Estimating costs  Budget uncertainty and risk management  CB Homework

4-3

4-4 $10,000 $ 5,000 $ 2,000 $17,000

4-5  Budgets are plans for allocating organizational resources to project activities. forecasting required resources, quantities needed, when needed, and costs  Budgets help tie project to overall organizational objectives.  Budgets can be used as tool by upper management to monitor and guide projects.

4-6

4-7 Analogous estimation Parametric estimation It will take 20 hours of a programmer’s time to write this module. The historical average rate for this type of programmer has been $100/hour. Therefore, the module cost will be $2,000. Bottom-up estimation

4-8 Estimate Uncertainty

4-9

4-10 Simulation Technique for Uncertainty in Project Costs

4-11 What is the probability the project comes in at $5000 or less? Simulation Technique for Uncertainty in Project Costs

4-12 Simulation Technique for Uncertainty in Project Costs

4-13 Simulation Technique for Uncertainty in Project Costs

4-14 Materials Very LowLowMediumHigh Probability Alternatives EV In-house12,50013,80015,20022, Outsource15, Combo11,20012,10014,00016,

4-15 BAC EV or BCWP – value of the actually performed work for a given period of time. AC or ACWP PV or BCWS Example: Project is the construction of a 16-mile road. The work is uniformly distributed over 12 weeks. Total budgeted amount is $600,000. At the end of the first 4 weeks, $125,000 has been spent, and 4 miles of road completed. $ Work Performed Schedule/Time

4-16

4-17

4-18 Why did FoxMeyer initiate the Delta III project? What was the solution? What was FoxMeyer implementing as part of the project? What were the problems and issues? What can we learn about managing projects?