1 - Project and Program Management Flashcards
Cost-Benefit Analysis
Cost-benefit analysis estimates the total monetary value, costs and benefits, of a project. Cost-benefit analysis is typically used for public projects such as highways and other public facilities.
Jules Dupuit
French engineeer that conceived Cost’Benefit Analists in 1848
In the United States, cost-benefit analysis became common as a result of the __________. This act required that the U.S. Army Corps of Engineers undertake waterway system projects when the total benefits exceed the costs of the project.
Federal Navigation Act of 1936
Name Four (4) Characteristics of Cost-benefit Analysis
- Requires all costs to be converted into a monetary value (including social and environmental benefits; this is one of its main challenges).
- Cost and benefits need to be set in a particular time and place
- To determine cost-benefit, the proposed project is compared to the current condition
- If ratio of benefits is greater than 1, the monetary benefits of the project outweight the cost (the largest ratio creates the highest net monetary value)
Cost-Effectiveness Analysis
Method develop by the military to prioritize resources among competing projects. Particulary when resources are limited.
Cost-effectiveness Ratio (CE Ratio)
(cost of new strategy - cost of current practice)/(effect of new strategy - effect of current practice)
Net Present Value
Net Present Value calculates the net monetary value of a project, discounted to today’s present value. If the monetary value of the project (e.g. Stadium) is greater than zero, it is then asumed that the project’s monetary benefits outweight its monetary cost.
To calculate net present value, you need to know ________ (4)
- The years of the project’s lifespan
- The quantified monetary benefits
- The monetary costs
- The interest rate
An alternative to Net Present Value is to calculate an Internal Rate of Return. In this case, ______________________.
The project’s net present value is at zero and the interest rate is blank. If the calculation results in an interest rate that is greater than the available market interest rate, then the project would be financially beneficial.
Project Management Techniques
Goals Achievement Matrix (GAM)
- Comprehensive way to evaluate a project, often used to set priorities when there is a long list of projects that cannot be implemented entirely.
- It consists of a project evaluation matrix that includes competing projects in rows and the evaluation criteria in columns.
- The evaluation criteria are based on the various stakeholder groups that may be impacted by the costs or that may receive benefits.The matrix shows the anticipated attainment of a project’s goals and the assignment of accomplishing a goal to a group.
Gantt Chart
This chart focuses on the sequence of tasks necessary for project completion. Each task is represented as a single horizontal bar on an X-Y chart. The relationship usually shows dependency, where one task cannot begin until another is completed.
Linear Programming
Linear programming is a project management method that attempts to find the optimum design solution for a project. This system takes a set of decision variables, within constraints, and generates an optimum design solution.
Program Evaluation and Review Technique (PERT)
Program Evaluation and Review Technique (PERT) is a scheduling method that graphically illustrates the interrelationships of project tasks. PERT is a good choice when precise time estimates are not available for project tasks. The U.S. Navy developed this method in the 1950s and it is now used widely in the defense industry. The PERT planning process involves the following steps:
* Identify the specific activities and milestones;
* Determine the proper sequence of the activities;
* Construct a network diagram;
* Determine the critical path;
* Update the PERT chart as the project progresses.
Critical Path Method (CPM)
Critical Path Method (CPM) is a project analysis tool that generates a “critical path” through the project tasks. Each project task has a known amount of time to complete and cannot be completed before the previous one is completed. The longest pathway is the critical pathway.
PERT and CPM work when a project is of ____________. Typically, project management software is used to perform this kind of analysis. Over time these two methods evolved to be considered one method, PERT/CPM.
Large Scale
