Project economy Flashcards
Key Performance Indicators (KPIs) - what they do
Key Performance Indicators (KPIs) are the critical (key) indicators of progress - see example
toward an intended result.
• Make the project in the same direction
• Follow up how the activities are conducted to fulfil objectives and goals
• Measure and adjust
Introduction - goals and indicators
• Setting goals, i.e. the desired level of performance linked to objective
• Tracking progress against goals.
• Working with leading indicators that will lead to future
success/benefits. Leading indicators are precursors of future success
and lagging indicators that show how successful the project was at
achieving the results according to set goals
Characteristics of a good KPI
• Provide objective evidence of progress towards achieving a desired goals/
results
• Measure what is intended to be measured to support communication/decision
making
• Offer a comparison of measurement of performance change over time
• Can be used for tracking of efficiency, effectiveness, quality, timeliness,
economics, project performance, personnel performance or resource utilization.
• Provide a balance between leading and lagging indicators
SMART
S - Specific e.g. what is an indicator of success?
M - Measurable e.g. can the indicator be tracked?
A - Aschievable e.g. is the KPI realistic?
R - Relevant e.g. does the KPI reflect the overall goals of the project?
T - Timeframed e.g. when should the KPI be met?
KPI types:
Leading, proactive (i.e. activities to perform), measures probably predicts future
outcome.
Lagging, reactive (i.e result of the activities performed)
Inputs - measure attributes (amount, type, quality) of resources consumed in
activities that produce outputs
Process - or activity measures focus on how the efficiency, quality, or consistency of
specific processes used to:
• produce a specific output;
• measure controls of process
Outputs - result measures that indicate how much work is done, define what is
produced i.e deliverables
• Strategic follows the organization’s overall goals linked to immediate and End
outcomes
• Operational, organization’s efficiency and processes and are linked to certain
operational functions
Pricing strategy
Pricing strategy 1
Develop a cost model and estimating
guidelines for minimum cost to meet
minimum customer requirements
Pricing strategy 2
Develop proposed project baseline
compliant with customer requirements
Pricing strategy - >
- Estimate cost realistically
- Squeeze out unnecessary costs
- Determine realistic minimum cost
Pricing strategy 1 • Adjust cost estimate for risks • Add desired margins • Only bid if the price within competitive range
Pricing strategy 2
• Determine “should-cost” including risk adjustment
• Compare final cost estimate to customer budget
and the “most likely” price
• Bid the lowest price or lower according to must win
Total pricing
Total pricing costs obtained from pricing out ALL activities over the scheduled
period i.e. pricing out the work break down structure (WBS) (and/or activity
schedule)
• Priced out at the lowest level
• Analyzed due the potential impact on company resources, total cost analysis
Total pricing - 4 components
- Labor costs
- Overhead (OH) costs
- Materials (support costs)
- Travel costs
Labour costs
see diagram pp
- Overhead (OH) costs - based on
Overhead (OH) costs estimated as a function between:
• Direct labor costs
• Direct business projections
• Projection of overhead expenses
- Overhead (OH) costs (examples)
Overhead expenses • Building rent • Clerical • Consulting services • Corporate auditing expenses • Holiday • Group insurance • General ledger expenses … Business projections • Office supplies • Payroll taxes • Postage • Meetings • Sick leave • Supervision • Vacation • Telephone
3. Materials/ support costs • Materials • Purchased parts • Subcontracts • Freight • Travel
Life Cycle Costing (LCC)
Life cycle cost analysis:
The total costs for the organization for ownership and acquisition of
the product over its full life; i.e. R&S, production, operation, support,
disposal.
Systematic analytical process of evaluating various alternatives/
courses of action early in a project – choice of scarce resources.
Cost control (costing)
- Cost estimating
- Project cash flow
- Direct labor costing
- Overhead rate costing
- Company cash flow
- Cost accounting
Purpose of cost control
- Verification of process accomplished by the comparison of actual performance
to date - Decision making
• Project plan, schedule, and budget
• Detailed comparison between resources expended to date (i.e. slacktime) and
predetermined resources (i.e. needed for remaining work and impact )
• Projection of resources to be expended through project completion
