Budgeting & Cost Estimation : Being Presented By:
Mohammad Saber Yaqin
Mohammad Naser Kotobi
Mohammad Idriss Irfan Budgeting & Cost Estimation Contents : Contents Cost Management
Problems with the technique
Mistakes made in Cost Estimation
Top-Down and Bottom-Up Methods
References Cost Management : Cost Management Management of the processes involved in planning, estimating, and controlling costs so that the project can be completed within the approved budget.
Cost Controlling Cost Estimation : Cost Estimation Organizing the project into work phases
Estimation of costs of tasks of WBS Ingredients of Cost Estimation : Ingredients of Cost Estimation Resource required for the project.
Overheads in the technology.
Profitability from the project.
Total expenses Problems with Cost Estimation : Problems with Cost Estimation Low initial estimates
Unexpected technical difficulties
Lack of definition
External factors Mistakes in Cost Estimation : Mistakes in Cost Estimation Not properly understanding the scope of the project.
Trying to provide detailed estimates before project management requirements.
Relying on verbal means of report only
Not including any contingency in the budget Tips of Cost Estimation : Tips of Cost Estimation Budget set aside by Finance.
Expert and talented brains.
Breakdown in terms of contract, external or permanent resources.
Never book any resource 100% of the time. Tips of Cost Estimation : Tips of Cost Estimation Always ask what management time needs to be included in your project cost estimation.
Contingency approach to the Budget.
All ancillary tasks should be kept in mind.
Understanding the culture of the organization. Budgeting : Budgeting Allotment of the budget for each work package.
Distribution of TBC over duration of time
How would be the resources spent.
Cost estimates, work break down structure and project schedules are interrelated concepts. Bottom-Up (Cost Aggregation) : Bottom-Up (Cost Aggregation) Cost of individual units
Resources required for individual units
Summation of funding of all individual units
Addition of funding for every project Drawbacks : Drawbacks Request for more funds
Rise up to distrust between members & Top Management
Small mistakes can become monster challenges Benefits : Benefits Accuracy
Involvement of all members
Individual Responsibility & Accountability
Specialization in members
Easy calculation (does not require expert knowledge) Top-Down Method : Top-Down Method Budget of upper level management
Project base budgeting
Higher level tasks
Medium level tasks
Last unit Advantages : Advantages Beneficial in financially worse situations
Little cases of wastage of resources
Easy & Simple calculation from top
No need to identify every small task Drawbacks : Drawbacks Inaccuracy
Requires expert knowledge at top level
Senior managers may use their power
Throwing responsibility of effective use of the funds to next line Conclusion : Conclusion Without proper planning of cost management, deliverables may happen, but chances of over shooting the budget always remain.
It is very critical that we need to keep a strict vigil on various processes involved in estimation, budgeting and control in a project so as to ensure its completion within the allotted time frames and budget. References : References http://www.businessknowledgesource.com
Fundamentals of Project Management by James P. Lewis