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PMP Certification: A Beginner s Guide
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Cost Management Summary
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As mentioned at the beginning of this chapter, cost management is one of the primary constraints on projects, and costs should be managed as if your own money was being used Studies show that cost overruns average over 45 percent of original budgets! According to a Software Magazine article, cost overruns in 1994 equaled 189 percent over the original estimate This was reduced to 69 percent in 1998 and further reduced to 45 percent in a 2000 study[10] Some of the likely reasons are poor initial cost estimates, unrealistic budgets, poor financial management, and changes in scope, any of which will likely yield a lower than expected return on investment (ROI) The good news is that a lot of good tools and techniques are available to help you manage cost The best way to manage cost on your project is to
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Stay alert and focused on project costs Use the tools and resources available to effectively estimate, monitor, report and manage costs Work with the project team to ensure everyone is doing their part to provide accurate cost estimates, develop and monitor budgets, and help manage cash flow
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Also, you want to use earned value analysis (EVA), when possible and as appropriate, to ensure that the project s return on investment (ROI) is achieved One thing that is painfully clear is that if you and the project team are not diligent in managing cost and reporting status in a timely manner, you are at risk when it comes to cost management Another thing to remember is, as a project manager you need to look beyond identifying potential cost problems and make sound recommendations to keep the gaps (misses) from showing up in the future
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References
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1 Phillips, Joseph PMP Project Management Professional Study Guide, Second Edition,
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(McGraw-Hill, San Francisco), 2008, page 267
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2 Wikipedia, http://enwikipediaorg/wiki/Profit_margin 3 Mulcahy, Rita PMP Exam Prep, Sixth Edition (RMC Publications, Inc), April 2009,
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page 232
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7: Project Cost Management
4 US Department of Energy Project Management Practices: Performance Baseline
Development and Validation, June 2003, http://oecmenergygov/Portals/2/ PBDevValidationpdf
5 Mulcahy, Rita PMP Exam Prep, Sixth Edition (RMC Publishing, Inc), April 2009,
pages 241 242
6 FinAid, http://wwwfinaidorg/loans/npvphtml 7 Investopedia, http://wwwinvestopediacom/terms/f/futurevalueasp 8 Understanding the Time Value of Money, Investopedia, http://wwwinvestopedia
com/articles/03/082703asp
9 Wikipedia, http://enwikipediaorg/wiki/Depreciation 10 Johnson, Jim, Karen D Boucher, Kyle Connors, and James Robinson Collaboration:
Development & Management: Collaborating on Project Success, Software Magazine (February/March 2001), http://wwwsoftwaremagcom/archive/2001feb/ collaborativemgthtml
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Project Quality Management
PMP Certification: A Beginner s Guide
Key Skills & Concepts
Definition of quality How to measure quality The importance of managing project quality Plan-Do-Check-Act (PDCA) cycle Introduction to Six Sigma and Lean Three quality-management processes Continuous improvement Cost of quality conformance and nonconformance Types of reports and charts Determining whether a project meets the requirements and expectations Quality terms Statistical sampling
ow do you really know what a quality product or service is As a project manager, how do you know you have delivered a quality project The answer is simple: Quality is in the eyes of the customer After all, the customer is paying for the product, service, or result of the project The customer needs to feel the project is delivered to their specifications and that the project does what it was intended to do The tough part of measuring quality at the project level is that it tends to be elusive and in many cases is a moving target Some things are extremely difficult to measure because the qualities are intangible If you ask 100 project customers what their idea of quality is, you will likely get well over 100 different answers because their current views or expectations vary depending on when and how you ask the question (face-to-face interview, survey, e-mail, by phone, and so on) Early in the project life cycle the customer might simply say they want a fullfunction website to promote their products or services In the middle of the life cycle when the customer sees what functions and features are being developed, they are likely
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