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Manage project cost

BSBPMG514 - Manage project cost

Candidate’s Workbook

Editor: John Bailey

Author: Jayde West

Copyright

Text copyright © 2014, 2015 by John N. Bailey

Illustration, layout and design copyright © 2014, 2015 by John N. Bailey.

Under Australia’s Copyright Act 1968 (the Act), except for any fair dealing for the

purposes of study, research, criticism or review, no part of this book may be

reproduced, stored in a retrieval system, or transmitted in any form or by any means

without prior written permission from John N. Bailey. All inquiries should be directed

in the first instance to the publisher at the address below.

Copying for Education Purposes

The Act allows a maximum of one chapter or 10% of this book, whichever is the

greater, to be copied by an education institution for its educational purposes provided

that that educational institution (or the body that administers it) has given a

remuneration notice to John N. Bailey.

Disclaimer

All reasonable efforts have been made to ensure the quality and accuracy of this

publication. John N. Bailey assumes no responsibility for any errors or omissions

and no warranties are made with regard to this publication. Neither John N. Bailey

nor any authorised distributors shall be held responsible for any direct, incidental or

consequential damages resulting from the use of this publication.

Published in Australia by:

John N. Bailey

PO Box 6214

Yatala, QLD, 4207

Australia

Manage project cost

Manage project cost

BSBPMG

Document Name: BSBPMG514 - Workbook.docx Created Date: 19 Oct. 15 Document No:

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BSBPMG514 - Manage project cost

Manage project cost

Document Name: BSBPMG514 - Workbook.docx

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Created Date Document Name: Last Modified Date

• Modification History Contents - Application: - Unit Sector - Introduction - This Learning Guide covers: - Learning Program - Additional Learning Support - Facilitation - Flexible Learning - Space - Study Resources - Time - Study Strategies - Using this learning guide:
• The Icon Key - How to get the most out of your learning guide - Additional research, reading and note taking
• Performance Evidence
• Elements and Performance Criteria
• Foundation Skills
• Knowledge Evidence
• Assessment Conditions
• 1. Determine project costs
  • with input from stakeholders and guidance from others 1.1 Determine resource requirements for individual tasks identified in the work breakdown structure, - Benefits of the WBS
    • Managing Resources
      • Resource estimation
      • Resource acquisition
      • Resource levelling
      • Human resource planning
      • Resource allocation
    • Learning Assessment 1:
  • 1.2 Estimate project costs to enable project budget to be prepared within agreed tolerances
    • Ascertaining Project Costs
      • Project Cost Estimating
    • Project Cost Estimating
      • Tools & Techniques
      • Experience with Similar Projects
      • Planning Horizon
      • Project Duration
      • People
      • Expert Judgment
      • Analogous Estimating
      • Parametric Estimating
      • Bottom-Up Estimating
      • Three-Point Estimates
      • Reserve Analysis
      • Cost of Quality
      • Project Management Estimating Software
      • Vendor Bid Analysis
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      • Learning Assessment 2:
        • Describe how you would estimate project costs within agreed tolerances.
    • 1.3 Develop a project budget
      • Project Cost Budgeting
        • Direct Costs
        • Indirect Costs
        • Reserve Analysis
        • Estimating Costs
        • Cost Baseline
      • Cost Baseline & Funding Requirements
        • Building the Planned Project Budget
      • Developing a Baseline Budget for a Project
        • When to Add a New Baseline
        • Setting Baselines in Project Insight, Project Management Software
      • Learning Assessment 3:
    • and ongoing management of project finances 1.4 Develop a cost-management plan, within delegated authority, to ensure clarity of understanding
    • Financial-management processes and procedures may include: - Understanding Control
      • Project Cost Control
        • Delegated Authority
        • Earned value management
      • Create a Project Budget Using the Top-Down Approach
      • Create a Budget Estimate Using the Bottom-Up Approach
        • Monitoring the Budget
      • Learning Assessment 4:
• 2. Monitor and control project costs
     • Resources
     • against budget 2.1 Implement agreed financial-management processes and procedures to monitor actual expenditure
       • Monitoring Expenditures
         • Regular Monitoring
         • Organisational policies and procedures
         • Need
       • Monitoring the Budget
       • Learning Assessment 5:
     • actions 2.2 Select and use cost-analysis methods and tools to identify cost variations and evaluate alternative
       • Reading A
       • Learning Assessment 6:
     • 2.3 Implement and monitor agreed actions to maintain financial objectives
       • Four Actions to Monitor your Projects’ Financial Objectives
       • Project Cash Flow
       • Learning Assessment 7:
     • 2.4 Provide accurate and timely financial reports
       • Reading C
       • Earned Value
       • Learning Assessment 8:
• 3. Complete cost-management processes
     • Resources
     • 3.1 Conduct appropriate activities to signify financial completion
       • Financial Completion
         • Financial Record Keeping
       • Learning Assessment 9:
     • management 3.2 Review project outcomes using available records to determine effectiveness of project cost
       • The PIR Process
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• 19 Oct. Manage project cost
• 19-Oct- BSBPMG514 - Workbook.docx

BSBPMG514 - Manage project cost

Application:

This unit describes the skills and knowledge required to identify, analyse and refine

project costs to produce a budget, and to use this budget as the principal mechanism

to control project cost.

It applies to individuals responsible for managing and leading a project in an

organisation, business, or as a consultant.

No licensing, legislative, regulatory or certification requirements apply to this unit at

the time of publication.

Unit Sector

Management and Leadership – Project Management

Introduction

As a worker, a trainee or a future worker you want to enjoy your work and become

known as a valuable team member. This unit of competency will help you acquire

the knowledge and skills to work effectively as an individual and in groups. It will

give you the basis to contribute to the goals of the organisation which employs you.

It is essential that you begin your training by becoming familiar with the industry

standards to which organisations must conform.

This unit of competency introduces you to some of the key issues and

responsibilities of workers and organisations in this area. The unit also provides you

with opportunities to develop the competencies necessary for employees to operate

as team members.

This Learning Guide covers:

Determine project costs

Monitor and control project costs

Complete cost-management processes

Learning Program

As you progress through this unit you will develop skills in locating and

understanding an organisations policies and procedures. You will build up a sound

knowledge of the industry standards within which organisations must operate. You

should also become more aware of the effect that your own skills in dealing with

people has on your success, or otherwise, in the workplace.

Knowledge of your skills and capabilities will help you make informed choices about

your further study and career options.

Additional Learning Support

To obtain additional support you may:

• Search for other resources in the Learning Resource Centres of your learning institution. You may find books, journals, videos and other materials which provide extra information for topics in this unit.
• Search in your local library. Most libraries keep information about government departments and other organisations, services and programs.

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• Contact information services such as the Equal Opportunity Commission, and Commissioner of Workplace Agreements. Union organisations, and public relations and information services provided by various government departments. Many of these services are listed in the telephone directory.
• Contact your local shire or council office. Many councils have a community development or welfare officer as well as an information and referral service.
• Contact the relevant facilitator by telephone, mail or facsimile. Facilitation

Your training organisation will provide you with a flexible learning facilitator.

Your facilitator will play an active role in supporting your learning, will make regular

contact with you and if you have face to face access, should arrange to see you at

least once. After you have enrolled your facilitator will contact you by telephone or

letter as soon as possible to let you know:

• How and when to make contact;
• What you need to do to complete this unit of study;
• What support will be provided;
• Here are some of the things your facilitator can do to make your study easier;
• Give you a clear visual timetable of events for the semester or term in which you are enrolled, including any deadlines for assessments;
• Check that you know how to access library facilities and services;
• Conduct small ‘interest groups’ for some of the topics;
• Use ‘action sheets’ and website updates to remind you about tasks you need to complete;
• (^) Set up a ‘chat line”. If you have access to telephone conferencing or video conferencing, your facilitator can use these for specific topics or discussion sessions;
• Circulate a newsletter to keep you informed of events, topics and resources of interest to you;
• Keep in touch with you by telephone or email during your studies.

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Make up a study timetable and stick to it. Build in “deadlines” and set yourself goals

for completing study tasks. Allow time for reading and completing activities.

Remember that it is the quality of the time you spend studying rather than the

quantity that is important.

Study Strategies

Different people have different learning 'styles'. Some people learn best by listening

or repeating things out loud. Some learn best by 'doing', some by reading and

making notes. Assess your own learning style, and try to identify any barriers to

learning which might affect you. Are you easily distracted? Are you afraid you will

fail? Are you taking study too seriously? Not seriously enough? Do you have

supportive friends and family? Here are some ideas for effective study strategies:

Make notes. This often helps you to remember new or unfamiliar information. Do not

worry about spelling or neatness, as long as you can read your own notes. Keep

your notes with the rest of your study materials and add to them as you go. Use

pictures and diagrams if this helps.

Underline key words when you are reading the materials in this learning guide. (Do

not underline things in other people's books.) This also helps you to remember

important points.

Talk to other people (fellow workers, fellow candidates, friends, family, your

facilitator) about what you are learning. As well as helping you to clarify and

understand new ideas, talking also gives you a chance to find out extra information

and to get fresh ideas and different points of view

Using this learning guide:

A learning guide is just that, a guide to help you learn. A learning guide is not a text

book. This learning guide will

• describe the skills you need to demonstrate to achieve competency for this unit;
• provide information and knowledge to help you develop your skills;
• provide you with structured learning activities to help you absorb the knowledge and information and practice your skills;
• direct you to other sources of additional knowledge and information about topics for this unit.

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The Icon Key

Key Points

Explains the actions taken by a competent person.

Example

Illustrates the concept or competency by providing examples.

Learning Assessment

Provides learning assessment activities to reinforce

understanding of the action. This is called formative

assessment

Formative assessment

The goal of formative assessment is to monitor your learning to

provide ongoing feedback that can be used by your trainer to

improve their teaching and so you can improve your learning.

More specifically, formative assessments:

• help you identify your strengths and weaknesses and target areas that need work
• help your trainer recognise where you are struggling and address problems immediately

Chart

Provides images that represent data symbolically. They are

used to present complex information and numerical data in a

simple, compact format.

Intended Outcomes or Objectives

Statements of intended outcomes or objectives are descriptions

of the work that will be done. These are also known as your

Performance Criteria

Assessment

Strategies with which information will be collected in order to

validate each intended outcome or objective. This is called

summative assessment.

Summative assessment

The goal of summative assessment is to evaluate your learning

at the end of an instructional (learning) unit by comparing it

against some standard or benchmark.

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Performance Evidence

Evidence of the ability to:

• work closely with others to determine resources against budgetary frameworks
• prepare a budget and cost-management plan for a project
• monitor costs across a project's life cycle including solving cost variations and analysing possible alternatives
• record expenditure, create accurate financial reports and review cost-management processes.

Note: If a specific volume or frequency is not stated, then evidence must be provided at least once.

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Elements and Performance Criteria

BSBPMG514 - Manage project cost

Element

1. Determine project costs

1.1 Determine resource requirements for individual tasks identified

in the work breakdown structure, with input from stakeholders

and guidance from others

1.2 Estimate project costs to enable project budget to be prepared

within agreed tolerances

1.3 Develop a project budget

1.4 Develop a cost-management plan, within delegated authority, to

ensure clarity of understanding and ongoing management of

project finances

2. Monitor and control project costs

2.1 Implement agreed financial-management processes and

procedures to monitor actual expenditure against budget

2.2 Select and use cost-analysis methods and tools to identify cost

variations and evaluate alternative actions

2.3 Implement and monitor agreed actions to maintain financial

objectives

2.4 Provide accurate and timely financial reports

3. Complete cost-management processes

3.1 Conduct appropriate activities to signify financial completion

3.2 Review project outcomes using available records to determine

effectiveness of project cost management

3.3 Review cost-management issues and document improvements

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Skill Performance Criteria Description

Get the work done 1.1, 1.3, 1.4, 2.2, 2.3,

• Plans and schedules complex activities, monitors implementation and manages relevant communication
• Monitors actions against goals, adjusting plans and resources where necessary
• Uses analytical skills to review and evaluate process and decide on future improvements
• (^) Uses digital applications to access, organise, integrate and share relevant information in effective ways

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Knowledge Evidence

To complete the unit requirements safely and effectively, the individual must:

• explain appropriate budgeting processes, tools and techniques
• describe methods and tools for costing and cost analysis
• explain strategies for managing costs and their application in different situations
• outline processes for reviewing costs against outcomes
• summarise key organisational policies and procedures applicable to this role.

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1. Determine project costs

Determine resource requirements for individual tasks

identified in the work breakdown structure, with input

from stakeholders and guidance from others

1.2 Estimate project costs to enable project budget to be

prepared within agreed tolerances

1.3 Develop a project budget

1.4 Develop a cost-management plan, within delegated

authority, to ensure clarity of understanding and

ongoing management of project finances

1.1 Determine resource requirements for individual tasks identified in the work

breakdown structure, with input from stakeholders and guidance from others

Resources are commonly thought of as sources of supply or support, such as

money, time, people, materials, technology, and space. More specific resources will

be required depending on the type of project at hand. For example, for information

system projects, more specific resources may include system developers, project

managers, system analysts, stakeholders, development environments and

information.

In order to help ascertain exactly what resources are in fact required, it is

recommended to develop a WBS (Work Breakdown Structure). A work breakdown

structure is one of the most important tools you can use when managing a project.

It is simply a chart or outline of your projects deliverables. Large or complex

deliverables are broken down into smaller components. The lowest level components

for each deliverable are known as Work Packages.

There are some key aspects to keep in mind when you develop a WBS...

• 100% Rule: Together, all of the Work Packages defined in the WBS make up 100% of the project's scope of work. This also implies that anything that is not in the WBS is not part of the project.
• Mutually Exclusive: Each component in the WBS is a distinct component of work.

Non-Balanced is OK: You don't need to break down each deliverable into the same

number of components.

• No Sequencing: The WBS does not show the sequencing of work. It only identifies "what" work is needed.

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Benefits of the WBS

There are several benefits to developing a WBS for your project... The first benefit is that all of the work to be done by the project is identified. Because of this, by reviewing the WBS with project stakeholders you will be less likely to omit any work needed to deliver the desired project results. Second, it allows for more accurate cost and schedule estimates. Having identified the key deliverables in the Project Scope Statement, it is possible to estimate costs and schedule. But because they are at a high-level, they will be "ballpark" estimates. Breaking down each deliverable into smaller components will enable you to provide a more accurate and detailed estimate of costs and schedule. Third, the WBS provides a basis for resource requests and task assignments. By breaking down each deliverable into distinct work packages, you will be able to determine the skill sets needed to complete the work as well as the number of people needed for each task. Finally, a WBS will enable you to provide clear status reports on project progress since each work package is a measurable unit of work. Having a clear picture of your project's scope is critical for the financial planning and ultimately, its success. A project management work breakdown structure is a key tool for bringing clarity to your project's scope and effectively managing your project.

Managing Resources

Efficient and effective use of resources can often make or break a project due to the issues obtaining some resources. The allocation of resources can have a major influence on project schedules. For example, limited resources effects time, costs, and. The goal of activity resource estimating is to estimate the resources needed for each activity so they can be executed in the most effective. When estimating activity resources, it is often advisable to conduct some form of alternative analysis.

An ‘Estimating Technicals’ is when comparisons between the time needed, the

resources required and the desired quality of the final deliverance are examined.

‘Bottom Up’ estimating is a technique applied when the resource needs of an

activity cannot easily be assessed.

The ‘Primary Output’ of the activity resource estimating process is a detailed listing

of the resource requirements.

‘Resource Breakdown Structure’ is a categorised, graphical representation of all

required resources ordered by type or category.

After you have identified the activities involved in a project, determined the sequence

of these activities, and established a schedule, you are ready for the next step –

determining the resources that you need to accomplish your project activities.

You will need resources such as people, material and other supplies. For example, in

a website design project you would typically need graphic designers and

programmers, access to rooms to hold your meetings, software, computers, and so

on.

Project managers must account for the cost of all resources that will be necessary to

meet the scope of the project within the scheduled time. This is a difficult thing to do

well. If enough resources are not allocated, the project will fail. If an excess of

resources are allocated, costs will be inflated. This could make the relative benefit of

the project smaller, or could result in a client selecting another consultant that can

deliver the scoped tasks in a more cost efficient manner.

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