Project or Program Management Flashcards
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.
- Cost benefit analysis requires that all cots and benefits be converted to a monetary value. This means that social and environmental benefits, such as the preservation of open space, have a monetary value. converting the outcomes of projects into a monetary figure is one of the biggest challenges in conducting cost-benefit analysis.
- The costs and benefits must be set for a particular time and for a specified location.
- to determine the cost-benefit, the proposed project is compared to the current situation without the project.
- If the ratio of benefits over costs is greater than one, then the monetary benefits of the project outweigh its monetary costs. In comparing multiple project alternatives, the largest ratio creates the highest net monetary value.
Jules Dupuit
Conceived of the cost-benefit analysis in 1848
Federal Navigation Act of 1936
Required that the US army Corp of engineers undertake waterway system projects when the total benefits exceed the costs of the project.
Cost-Effectiveness Analysis
a method for selecting among competing projects when resources are limited, was developed by the military. For example, if a community has $50,000 to spend on park improvements, then several different projects can be prepared, such as adding playground equipment or purchasing a new lawn mower. The cost-effectiveness ratio, aka the CE Ratio, (cost of new strategy - cost of current practice)/(effect of new strategy - effect of current practice), can be used to determine which option is the most cost effective.
Net Present Value
Calculates the net monetary value of a project, discounted to today’s present valuye. For example, if the net present value of a proposed hockey arena is greater than zero, then one can conclude that the monetary benefit of the hockey arena outweighs its monetary costs. To calculate net present value, you need to know the years of the project’s lifespan, the quantified monetary benefits, the monetary costs, and the interest rate. An alternative is to calculate an internatl rate of return.
Internal Rate of Return
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.
Goals Achievement Matrix (GAM)
A comprehensive way to evaluate a project. 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
Developed in 1917 by Charles Gantt. 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 X-axis is the time scale over which the project will endure. The length of each taskbar corresponds to the duration of each task. The relationship usually shows dependency, where one task cannot begin until another is completed.
Linear Programming
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)
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 US 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
PERT and CPM work when a project is of a large-scale. Typically, project management software is used to perform this kind of analysis
Critical Path Method (CPM)
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 a large-scale. Typically, project management software is used to perform this kind of analysis
