ncv 3 project management hands-on support slide show - module 4
TRANSCRIPT
Project Management 3
Project Management 3 1Future Managers
Module 4: Project estimation and costing
Project Management 3 Future Managers 2
Module 4: Elements and resources to be costed
• After completing this outcome, you will be able to:– Identify the work elements of a given project– Identify cost types (elements) of a given project;– Assess a given project for work elements and
cost types (elements) of the project;– Determine the resource requirements of the
given project, in terms of type, quantity and unit cost, and document in an agreed format.
Project Management 3 Future Managers 3
1.1 Identifying the work elements of a given project
• Can you recall what the four phases of a project are?– Idea generating or initiation phase– Planning (and development) phase– Execution– Close-out (handover) phase
Project Management 3 Future Managers 4
Activity 1
Project Management 3 Future Managers 5
• As a knowledge refresher, draw a project life cycle and also indicate the four (4) phases or stages on the cycle
Tasks or activities• What is an activity?
– An activity may be defined as any task, job or operation that must be performed to complete the work package or project
– In a network diagram, an activity is always represented by an identity number and is represented by a box
Project Management 3 Future Managers 6
Tasks or activities• An activity box
Project Management 3 Future Managers 7
Early start Early finish
Float Activity number
Description
Duration
Late start Late finish
Tasks or activities• Activities in series
Project Management 3 Future Managers 8
Activity 1 Activity 2 Activity 3
Tasks or activities• Activities in parallel
Project Management 3 Future Managers 9
Activity 1
Activity 2
Activity 4
Activity 3
Work package• Work packages are a way of modularising the
project into manageable segments. Thus, tracking the progress of work packages is a way to assess and control the work done on a project
• By breaking work into work packages, you can determine the skills you need to complete the work on a project, and you can quantify how many people will be required to do the work
• Work packages allow you to communicate the work that needs to be done to other team members without getting into too much detail
Project Management 3 Future Managers 10
1.2 Identify the cost types of a given project
• Costing– Design and calculations– Scope of work, bill of materials and parts list– Detail planning– Firm prices from subcontractors and suppliers,
man hours and labour cost• Cost budgeting
Project Management 3 Future Managers 11
Activity 2 - Costing
Project Management 3 Future Managers 12
• Task 1– Page through newspapers for advertisements on
material such as: bathroom items, building material, hardware, etc.
– Write down a few items and their prices; to add them up and get a total price.
Activity 2 - Costing
Project Management 3 Future Managers 13
• Task 2– The first group of students can go to a shop selling
hardware/building material and ask for prices for the following items:
• Cement (per bag)• Building bricks (cost per brick + cost per 500 / 1000)• PVC gutters (1.8m or different lengths)• PVC down pipes; Roof tiles (per tile or per package)• Building sand (per cubic meter)• Exterior paint (prices for 500ml, 1 liter, 5 liter, 20 liter);• 2 x claw-hammer;• 2 x jigsaw;• 200 x wooden nails
Activity 2 - Costing
Project Management 3 Future Managers 14
– The second group of students have to organise a 21st birthday (event) and get prices for:
– Catering (3 course meal per person/head);– DJ (music – rate per hour or rate per event)– Venue– Table clothes (25)– Crockery (25 tables, ten guest per table)– Drinks (50 x 2 liter Coke, 25 cases Beer, 25 Bottles
champagne, 75 Bottles White Wine)– Note: Find out best price per unit or per pack (quantity) –
e.g. wine per bottle or per 6/12 bottle or 2/5 liters
Activity 2 - Costing
Project Management 3 Future Managers 15
• To do:– Write down the items and prices on a cost-
template consisting of the following columns: item; quantity; price per unit and cost
– Determine the total cost of the exercise.
1.2 Identify the cost types of a given project
• What is cost estimating?– Cost estimating involves developing an assessment
of the likely quantitative result – how much will it cost the performing organisation to provide the product or service involved
• What is pricing?– Pricing is a business decision – how much will the
performing organization charge for the product or service – that uses the cost estimate as but one consideration of many
Project Management 3 Future Managers 16
Activity 3: Sydney Opera House
Project Management 3 Future Managers 17
• Read the article on page 90 and answer the following questions:– If you were to plan a project, would you use the work (sketches) of
Jorn Utzon?– What was the cost escalation over the project duration – from start
to finish?– What was the time duration of the project?– Why did the government of Australia decide to continue with the
project?– From the design of Utzon, what was the first problem encountered
when building the Sydney Opera House?– Could we link this “problem” to an environmental factor, and if so,
which environment factor?– Are you aware of a project (specifically a building) in South Africa
which is also under an environmental threat?– Work out how many times the final cost exceeded
the original cost
1.2 Identify the cost types of a given project
• What is cost escalation?– The amount by which actual costs increase to overrun
the initial estimated costs is referred to as cost escalation
• Reasons for cost escalation– Uncertainty and lack of accurate information– Changes in design or requirements– Economic and social variables in the environment– Work efficiency, poor communication, and lack of
control– Ego involvement of the estimator– Nature of project contract
Project Management 3 Future Managers 18
1.2 Identify the cost types of a given project
• Components of estimating costs– Resource identification - involves planning and
deciding what resources are needed to complete project activities
– Cost approximating - entails estimating project costs
– Cost budgeting - involves allocating the estimated project costs to specific project activities
– Cost control - involves identifying the managing changes to project costs.
Project Management 3 Future Managers 19
1.2.2 Tools used to identify necessary resources which will determine the cost
of a project• The work breakdown structure• History• A description of available services• Experts• The scope statement
Project Management 3 Future Managers 20
1.3 Cost estimating techniques
• Top down estimating– The top-down estimating technique, also called
analogous estimating, is a technique that requires upper (top) management to examine past data from similar projects to develop a cost estimate for the current project
– In addition to past project data, top-down estimates are based on the manager’s experience, or expert judgment.
Project Management 3 Future Managers 21
1.3 Cost estimating techniques
• Bottom-up estimating– The bottom-up estimating technique requires a
cost estimate to be developed for each of the work packages in the WBS. Then, once the cost of each work package is estimated, the estimates can be added together to compile the total project cost estimate
Project Management 3 Future Managers 22
1.3 Cost estimating techniques
• Phased estimating– The phased estimating technique allows a
project to be broken into phases, with separate cost estimates being done for each phase, rather than for an entire project.
– Easier to use than other methods– Results are more accurate– Decreases the project team’s risk
Project Management 3 Future Managers 23
1.3 Cost estimating techniques• Supporting details necessary to create cost
estimates– Some types of supporting data are:– A description of the scope of the work for which
cost estimates were done– A description of how the estimates were made for
each work package– Reference to any historical data used to make the
estimates– A list of any assumptions made when creating the
estimates.– Estimates should be expressed in terms of currency
Project Management 3 Future Managers 24
1.3 Cost estimating techniques
• Project estimating pitfalls– Poorly defined project scope– Inadequately defined schedule– Incorrect work breakdown structure (WBS)– Failure to account for information– Inaccurate use of estimating techniques– Failure to account for overhead costs
Project Management 3 Future Managers 25
1.3 Cost estimating techniques• A common response to the possibility of errors
when estimating project costs is to simply increase all cost estimates by 5% to 10%.
• Some cost estimating problems include:– The price of resources can change over the course
of a project– Project resources can spoil or be wasted, so you
should include a cost allowance for problems and have more resources available than necessary
– Costs are frequently understated in order to make the project seem more attractive to stakeholders
– Sometimes problems occur without any explanation
Project Management 3 Future Managers 26
1.4 Project costs• Direct costs
– What are direct costs?• Those costs that can be specifically identified with an activity
or project– Direct costs include
• Direct management costs• Direct labour costs• Direct material costs • Direct equipment costs • Direct expenses • Travel cost• Legal fees • Training • Marketing / Advertising
Project Management 3 Future Managers 27
1.4 Project costs• Indirect costs
– What are indirect costs?• Indirect costs, also called overhead costs, are those costs
that cannot be directly booked to an activity or project, but are required to keep the company operational
– Indirect costs include• Indirect management costs• Indirect labour costs• Indirect materials• Indirect equipment• Indirect expenses• Facilities
Project Management 3 Future Managers 28
1.4 Project costs• Other project related costs
– If a project’s duration is reduced or extended how will the costs change? To do this calculation you need to determine how costs are affected by time. The following have to be considered:
• Rent increases with time• Running costs increase with time• If the project’s duration is reduced, employee labour rate
will increase if the workers have to work overtime• Contract labour on a fixed rate is not affected by time,
but their productivity may reduce if they have to work long hours
• Fixed price contracts may not be affected by timeProject Management 3 Future Managers 29
1.4 Project costs• Project office costs• Preliminary and general costs
Project Management 3 Future Managers 30
Activity 4: Direct, indirect and time related costs
Project Management 3 Future Managers 31
• Now that you know and understand the above mentioned three groups/types of cost (direct, indirect and time-related cost) divide into your groups and do the following:– Imagine that you are working on a project – list all
the sub-costs from the three main groups of cost.– Link a cost (or price) to each of the sub-costs (try to
stay realistic) and add it up– The total amount of your cost is your “budget”
(remember this is just an exercise and need not be 100% correct!)
Practical 5
Project Management 3 Future Managers 32
a. Link the cost (pg 103) next to the deliverables, activities and sub-activities of your work breakdown structure (WBS) – you may either do it in your manual or you may re-do the WBS and then add the cost next to the deliverables, activities or sub-activities
b. Calculate a cost estimation for the project – on the given template on page 104 (Annexure A)
Practical 5 (Solution)
Project Management 3 Future Managers 33
Practical 5 (Solution)
Project Management 3 Future Managers 34
Activity 5 – Direct and indirect costs
Project Management 3 Future Managers 35
• From the cost information of the project, divide the cost into direct and indirect costs and complete the template on page 105
Activity 5 (Answers)
Project Management 3 Future Managers 36
1.6 Determine the resource requirements of the given project• What are the resources used to complete
projects?– People– Facilities– Equipment– Expenses– Materials
• Careful resource planning allows you to know what resources are required for each work package
Project Management 3 Future Managers 37
Project Management 3 Future Managers 38
Deliverable Activities Resource Quantity Cost
1. Digging and laying the foundations
Hire a trencher for the digging workCement
Machine + Operator
1 R500 p/h
2. Building of house
Building of walls
Put up roof
Labour
Labour; Material
4 x Builders4 x Brick layers8 x Labourers
Rate per hour
Rate per hour
3. Plumbing work Bathrooms; kitchen; Laundry
Labour; Material 1 x Plumber2 x Labourer
Rate per hour
4. Electricity work
Pipes; wire and plugs; light fittings
Labour; material 2 x Electricians2 x Labour
Rate per hour
5. Paint work (outside and inside)
Paint of outside and inside walls
Labour; material 4 x Painters Rate per hour