Chapter 4 Flashcards
The _ _ of the work units of a project is a key determinant for MGT in deciding whether or not to support a project
aggregate cost
easier cost to define and measure
Tangible costs
more difficult cost to define and measure
Intangible costs
costs that are easily associated with a work unit
Direct costs
costs not easily associated with a work unit or a project
Indirect cost
the balance of benefits over costs of a project
Value of a project
_ - how long it will take before their investment in a project results in a positive cash flow
This stresses how quickly costs of a project are recovered (It does not care about the end result)
Payback analysis
the length of time that it takes for a company to recover the amount of money invested in the project
Payback period
_ - based on the calculation of expected cash flow
This approach uses a rate of interest to calculate today’s value of the future cost and benefit for a project
o The rate of interest use is based on the cost of capital
Net present value
o NPV = Sum… A / (1+R)^t
T = the year of the cash flows A = the amount of cash flow each year R = the discount rate
calculated as discounted benefits minus discounted costs divided by discounted costs multiplied by 100
Return on Investment
o Consistency in the approval process
o Ease of communicating selection criteria
o Rapid evaluation process
o Less politics
Advantages of rigid standards
o Lack of flexibility for professional judgment
o Fewer innovative proposals by employees
Disadvantages of rigid standards
Resources for obtaining estimates
- Experience
- Documentation
- Expert Opinion
o Can be affected by organizational culture and top MGT’s decision making style
o Individual tend to overestimate cost and time so they are giving ‘safe’ estimates
Experience
o Considered a very useful source when it is relatively current and when it describes similar cases
o Free from bias and offers an advantage over estimates obtained from individuals
o However, it can quickly become dated
Documentation
o Outsider expertise can provide potential benefits in the form of broader experience and reduced game-playing
o However, outsider experience may be limited because they might not have a good understanding of the organizational culture
Expert opinion
o Used with higher risk projects
Scenario planning
These estimates should be gathered using a bottom-up approach and should start after individual work units are determined
Multiple estimates
o For each scenario (best case, worst case, etc.) an average weight is assigned
o The smaller the variance for a set of estimates is, the more specific the results
o Where there is a large divergence between estimates, it is prudent to provide for contingency resources
Why multiple estimates are strongly recommended
making detailed estimates of cost and time for one or two cycles at a given time, and rough estimates are generated for subsequent cycles
Phase estimating
Any _ in describing why a certain methodology is used will erode the credibility of the estimates, and those preparing the estimates, in the mind of the customer
secrecy
A _ _ may become a factor when estimating time and cost for repetitive activities
learning curve
Estimates must be based on _ _ and free from extreme case assumption
normal conditions
An appropriate way to prepare for extreme situations is through the use of a _ _
contingency plan
When necessary, contingency situations are described and _ _ are appropriated for them at the planning phase of the project development life cycle
contingency funds
A _ _ of estimated times is appropriate when there is uncertainty regarding activity duration
risk analysis
- Identify possible risks
- Predict the likelihood of risks happening
- Estimate the potential impact of risks
- Communicate risks to stakeholders
- Prepare alternative responses
The purposes that risk analysis serves.
Modern project management is a process of _ _, communication, and adjustment.
constant negotiation
A _ _ _ or group can facilitate and encourage change proposals
requirements change committee
- Establish guidelines for submitting proposals for changes in the project
- Develop and communicate criteria for the evaluation of proposed change
- Evaluate and approve change
- Ensure compliance
Responsibilities of the requirements change committee.
_ _ _ _ and Critical Path Method (CPM) are the most widely-used for scheduling, monitoring, and communicating time aspects of projects
Program Evaluation Review technique (PERT)
_ programs are decision tools that enable decisions makers to formulate and build a decision model and to be able to analyze results and outcome
Simulation
_ _ _ integrate functions of earlier tools and are intended to analyze current situations as well as forecast future trends
Business intelligence software
o allocate resources o monitor progress o control quality o maintain team moral o award merit o ultimately ensure project success
What cost estimates are necessary for
from people in the organization; considers workplace culture, talent pool, inter-organizational relations, and HR policies.
Where to find experience (source of estimate)
from archives of previous projects.
Where to find experience (documentation)
widely used and includes a pool of internal and external experts.
o Similar to experience in pros and cons.
o Used for new projects where little record exists.
o More formalized and expensive.
o May require visits by external experts and sharing of information.
Where to find experience (expert opinion)
Based on history and experience, project managers may adjust estimates given by individuals; this, in turn, may result in further adjustment (overestimation or underestimation) by those providing estimates.
o This cycle creates ‘_ _’ and a non-productive environment.
game play
● Use work units and bottom-up approach.
● Define clearly work units and tasks.
● Avoid memory recollection
Considerations for estimates
● Obtain:
The best case scenario.
The most probable scenario.
The worst case scenario.
● Assign weights to these estimates.
● Use average scores and variance.
● Provide contingency resources for estimates with large variance.
● Calculate ‘upper limit’ and ‘lower limit’ to measure project duration.
Multiple estimates
● Sometimes, due to uncertainty, estimates are feasible for initial _ only.
● Only rough estimates of subsequent _ are initially feasible.
● Project development life cycle (initiation, planning, development, implementation, closure) can be the base for _ _.
● Project owners and sponsors must commit to a project with incomplete information about cost and time – not always an easy situation.
phase
phases
phase estimating
● Estimates are used to request funding, make decisions, schedule, negotiate, set goals, evaluate performance, etc.
● Events happen, technology advances, priorities change, and biases creep in.
● Methods, their appropriateness, strengths, and weaknesses must be explained.
● Assume ‘normal conditions’ – free from extreme case assumptions.
Considerations of multiple estimates
● For out-of-ordinary situations funds should be set aside at the planning phase of a project development life cycle.
● Documentation and communication around contingency situations is crucial.
● Such funds are not directly accessible by the project manager.
● Simply adding a margin to estimates must be avoided.
Contingency planning
● Appropriate where there is uncertainty regarding activity duration.
● Leads to developing alternative responses.
● Includes prediction or likelihood of happening.
● Includes estimate of risk impact.
● Depending on the nature and size of a project, it could be more or less extensive, detailed, or formalized.
● Leads to a change management process.
Risk analysis
● Change is beneficial - innovative ideas or suggestions are often made by team members.
● A _ _ committee can facilitate and encourage change proposals.
● With the approval of management, additional resources can be provided through contingency funds.
● Change may also become necessary for external reasons, such as change related to the competition, vendors, and the law
change management
o Establish guidelines for change proposals
o Develop and communicate criteria for the evaluation of proposed change
o Evaluate and approve change
o Ensure compliance
Responsibilities of Change Committee:
● Changes must be consistent with the overall _ _ _ of the organization and the broad scope of the project.
● Response to change requests must be _, especially for time-sensitive changes.
● Proposals to drastically change a project may replace the project with _ _ _.
goals and objectives
timely
a new one
