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Budget Planning :moneybag: and Procurement Management, MODULE 6: Budget…
Budget Planning :moneybag: and Procurement Management
Budget & Budget Planning
Everything boils down to money!
Project Budgeting
is important for getting the project up and running, which will also prevent unnecessary costs for resources
Cost Estimation :notebook_with_decorative_cover:
Analogous Estimate :bar_chart:
This is based on other project estimates
If a similiar project cost a certain amount, then it is resonable to assume that the current project will cost about the same.
Parametric Estimate :chart:
This is an estimate calculated by multiplying measured parameters by cost-per-unit values
Bottom-up Estimate :chart_with_upwards_trend:
If we view the project schedule as a hierarchy where the general descriptions of tasks are at the top ant the lower levels become more detailed, finding the price of each item at the lowest level and then summing them to determine the cost of higher levels is called
bottom-up estimating
Activity-based Estimate :male-factory-worker::skin-tone-2:
Estimates based on how much an activity costs, which materials are used and costs are added up
Budget Management
Cash Flow :money_with_wings:
Managing the money that goes in and out of the company/project
The PM would like to have as much cash available as possible
to use if activities exceed budget expectationsd
Contingency Reserves :warning:
Funds allocated for unforeseen, unplanned but statistically probable activities that will result to cost increases
Management Reserves :briefcase:
If something occurs during the project that requires a change in the project scope, money may be needed to deal with the situation before a change in scope can be negotiated with the project sponsor or client.
Budget Evaluation and Tools
Earned Value Analysis
a method of periodically comparing the budgeted costs with the actual costs during the project. It combines the scheduled activities with detailed cost estimates of each activity.
Schedule and Cost Variance
Variance: The difference between planned and actual progress
Schedule Variance
Cost Variance
Variance Indexes for Schedule and Cost
: gives an idea how much of the project is completed
Schedule Performance Index
SPI = EV / PV, if less than one, then project is behind schedule
Cost Performance Index
CPI = EV / AC
Budget Timeline :alarm_clock:
Costs are associated with activities, and since each activity has a start date and a duration period,
it is possible to calculate how much money will be spent by any particular date during the project.
Procurement Management
details the types of contracts, delivery dates, standard documents, etc and of how the procurement process will be managed.
Make-or-Buy Analysis :thinking_face:
"Will I make this by myself, or buy something that's already available?"
Contract Types
: generally differ with the type of certainty in a project :writing_hand:
Cost-reimbursable
Most often used when the scope of work or the costs of performing the work are not well known/
Time and Materials
On small activities that have a high uncertainty, the contractor might charge an hourly rate for labour, plus the cost of materials, plus a percentage of the total costs.
Fixed-price
Legal agreement between the project organization and an entity to provide goods and services to the project at an agreed price
Progress Payments and Change Management
Progress Payments
Payments made before the end of the project and based on the progress of the work
Example: Payment schedules based on the project completion
Change Management
Often changes occur on the project that require chanes in the contractor's scope of work
How these changes will managed during the life of the project is typically documented in the contract.
Capturing these changes early, documenting what changed and how the change impacted the contract, and developing a change order (change to the contract) are important to maintaining the progress of the project.
Procurement Process
Request for Quote
Request for Proposal
Qualifying Bidders
Bid Evaluation
Soliciting Bids
Award of Contract
Selecting the Contract Approach
Contract Management
Procurement Plan
Logistic and Expediting
MODULE 6
: Budget Planning and Procurement Management
Andrea Carla F. Dioso