Categories of estimating project time and costs
The two major categories of estimating project times and costs are bottom-up and top-down budget procedures. To begin with, bottom-up estimating can be defined as tracking individual cost elements of the project for estimating the sum cost of the entire project. Furthermore, this category employs Work Breakdown structure (WBS) during a follow up intended to track each element of the project (Frame, 2002, p. 215). Aggregations of WBS levels are provided with cost estimates related to each level determined until the final budget for the whole project is arrived at.
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The second category is the top-down approach to cost estimating. This approach is parametric in nature. It bases on the past experience of the manager on the related projects in order to come up with project estimates for costs and times.
Part-time estimates include the costs related to human labor that are not permanently employed in the project.
The ideal approach to develop optimal estimates for a project’s time and costs
The most ideal approach to project costs and times development is the top-down approach. In the first place, there is a possibility of mitigation of risks associated with underestimating or overestimating resulting from lack of information on unknown elements of the project. A project manager can achieve this by putting in mind the quality of fundamental estimates. The second advantage related to cost estimating using the top-down approach is that computers and special programs can be employed in the planning stages of the project, by using computer-aided technology, beside statistically boosting the estimates to come up with accurate or near-accurate estimates of time and costs(Smith, 1995, p. 88)
Given that an activity’s normal time and cost are 10 days and $400, and its crash time is five days and $800, what is the activity’s slope?
Project completion time is categorized into two; normal time and crash time. Normal time, as the word stands, defines the project’s completion as planned. Crash time on the other hand characterizes the completion of time earlier than the intended time, which is associated with additional costs and resources. The changes in cost over the change in time due to crashing results in activity slope. For a normal time of 10 days and a normal cost of $400, a time crash of 5days and a crash cost of $800 has the following activity slope.
The major types of costs and the costs controllable by the project manager
There are two major types of project costs, that is, direct costs and direct overheads. Direct costs are the cost that is directly attributed to the project work. The reason for the definition is that there rate of occurrence in the course of the project depends on the intensity of the activities in the project. On the other hand, direct overheads are costs incurred at the beginning of the project, mainly for the acquisition of equipment, and may occur once
Given an equal level of risk and the need to reduce overall project duration, why not to select the activity with the lowest slope in the entire project network to crash first?
Crashing a project needs critical decision making from the project manager. Since crashing means savings in time but incurring expenses indirect costs, the slope indicates an increment in costs per day. A steeper slope indicates higher additional costs. Therefore, it is advisable to crash activities with the lowest slopes since they are cost-effective.
The advantages and disadvantages of reducing project scope to accelerate a project
Advantages of reducing project scope
- It is evident that customers may require shortened timelines for completion of projects; therefore, project scope reduction is the only way possible for the project manager to meet timelines.
- It enables products to be released on market early enough.
- The project manager will have the attention and focus of the project.
- If it is not professionally handled, costs may escalate, leading to budget deficits.
- Scope reduction poses a threat of ignorantly sidestepping important scope parts and ideas.
It is recommended that a good record and documentation of reasons for scope reduction be kept for future reference during the project’s life. Besides, critical paths should be considered as a priority in choosing activities to crash.
Francis, J.D. (2002). The New Project Management: Tools for an age of rapid change, complexity, and other business realities. San Francisco: JOSSEY-BASS.
Smith, N.J. (1995). Project cost estimating. New York: Thomas Telford.