PROJECT MANAGEMENT

LESSON 4
PLANNING COST & QUALITY MANAGEMENT

OBJECTIVES
- Cost management
- Four main phases of cost management:
o Determine budget
o Control Cost
o Costs incurred during a project
o Estimating costs
- Estimating techniques
- Quality management
- Customer satisfaction
- Quality control
- Quality assurance
- User acceptance testing

COST MANANGEMENT:
- Cost management is the process of:
 Estimating
 Controlling
- Predict future expenses in order to reduce the chances of it going over budget
- Project costs are calculated during the planning phase
- Expenses are documented and tracked
- Upon project completion predicted costs vs actual costs are compared

DETERMINE BUDGET
- Project budgets are vital in allow Project managers to make smart decision regarding cost, scope & time
- The budget takes into account all monetary resources needed to achieve project goals
- In order to establish a budget, you will need the following resources:
o Risk Registers
o Cost management plan
o Project Schedule
o Resource Calendars
o Scope Baseline
o Cost estimates

CONTROL COSTS
- “Monitor all costs in real-time to ensure they stay aligned with the budget
- Chart out task and team-based costs
- Track productivity to estimate billable hours
- Set task-based and hourly rates as required” (Clarizen, 2020)
- The process of overseeing costs throughout the project and managing the overall project budget
- It allows opportunities to identify ways of reducing the expenses within the project which can in turn increase
overall profits
- It involves accounting for financial risks that could arise
 - If costs are not controlled the project runs the risk of the project going over budget and not aligning with
scope

TIPS FOR SUCCESSFUL COST CONTROL

 “Capture the entire scope in your WBS
 Insist on input and collaboration from outside stakeholders
 Determine the cost categories used in the organization
 Develop a trust within your team
 Take action immediately when there are is risk of exceeding budget” (Clarizen, 2020)

COSTS INCURRED DURING A PROJECT

- Direct cost
- Are directly linked to your specific project output e.g. your project needs a new software
- Indirect cost
- These are not linked directly to your project e.g. the rent for your office space
- Fixed cost
- These are once off expenses e.g. buying a company vehicle
- Variable cost
- These costs are subject to change e.g. gasoline prices fluctuate meaning it is not a constant expense
- Sunk cost
- The payment has already been paid e.g. market research before launching a new product

TERMS TO KNOW
- Unburdened – base salary
- Burdened Cost – cost of employee benefits (Health Insurance, car allowances & Cell Phone contributions)
- Material Cost (equipment)
- Ancillary (training, travel, fees)

ESTIMATING COSTS:
- The process of forecasting what will be required in order to achieve the project scope
- The forecast or estimate can often influence the decision to continue the project (RAG)
- Estimates do not need to be perfect
- Costs can be broken down into:
- Direct costs
- Indirect costs
ESTIMATION TECHNIQUES

PARAMETRIC ESTIMATION TECHNIQUE

Estimates are based on historical data

- How much did a singular item cost
- How long did a singular task take to complete?
- Most found in construction where required
- material and times can be measured

PARAMETRIC EXAMPLE:
Your project requires a room that is 2,5 m high(h) and 10 m wide (w) to be painted

Historical data demonstrates:

20 minutes to paint 1 m2
1L of paint is utilised
Total square meterage=
2.5(h) x 10(w) = 25 m2
25 m2 x 20 min = 500min/60 min = 8H33min
25 m2 x 1L = 25L of paint

ANALOGUS ESTIMATION TECHNIQUE

- Estimates are based on historical data for similar projects
- or processes
- Elements that can be referenced are:
- Project Cost
- Scope
- Duration

BELL CURVE TECHNIQUE

QUALITY MANAGEMENT

CUSTOMER SATISFACTION
- In the planning phase you need to ensure that you clearly understand the customers requirements
- This allows you to deliver the end result that satisfies everyone involved in the project
 - Focusing on their satisfaction facilitates building a positive and trust based relationship which could lead to
future projects

TIPS FOR SATISFIED CUSTOMERS

- Keep customers informed
o Progress checks
o Weekly meetings
o Return phone calls/emails
o Under promise & overdeliver
o Take ownership even when things go wrong
o Make sure not to disregard what the customer is saying because ‘you know better’

QUALITY PLAN
- Allows project managers to track:
- Alignment with customer requirements
- Alignment with internal & external stakeholders
- Problems within the project (trace back to start)
- Overall conformance to the project plan

“The Quality Management Plan describes the following quality management components:
- Quality objectives
- Key project deliverables and processes to be reviewed for satisfactory quality level
- Quality standards
- Quality control and assurance activities
- Quality roles and responsibilities
- Quality tools
- Plan for reporting quality control and assurance problems” Project Management Advisor v2.2, 2020)

QUALITY ASSURANCE

- Process oriented
- Focuses on ensuring that the desired quality requirements are being met by evaluating processes &
procedures
- This process helps prevent defects or deviations from the requirements

QUALITY CONTROL
- Product oriented
- Focuses directly on the product/ deliverable in relation to the specifications at multiple stages of the project
- This process must be present throughout the lifecycle of the project so that adjustments can be made as
needed rather than at the end of the project

USER ACCEPTANCE TESTING

- This form of testing is used in the IT industry
- Designated testers are challenged with breaking or finding gaps in system functionalities or design
- Bugs/defects are captured & developers/designers need to rectify the problem
- Their solution is then tested again until it meets user requirements