Project Scenario for Highway Lights - Case Study Example

Project Management Student’s Name Institutional Affiliation Part A Project Budget The total budget of the project is $ 1.8 million dollars to repair traffic lights along Nepean Highway. The costs associated with the project fall in to two broad categories which are direct cost and indirect costs. Direct costs Salaries of the team members in the project- the total budget allocated for salaries is $ 0.1 million dollars. This is enough to cater for the 5 members of the project team. Equipment- the equipment to be employed in the project include; Analog timings, Transistors, digital Timings, non-computers, microprocessors, Volume density controllers and the Electro-mechanical equipment. The budget allocated for hiring equipment for the project, acquisition of new technology and amortization of the existing equipment is $ 0.3 million dollars to be use within the entire project period Facilities- The project will be performed from a new location which will be rented for a period of 15 months for purposes of planning and project execution. Also the location will be used to set up a temporary traffic control room for testing the project upon completion. The budget for this is $ 0.2 million dollars Fees and charges-The total fees and direct charges are estimated at cost $ 0.2 million dollars. Materials- Materials to be used during the project are estimated at cost. The total cost of materials is $ 0.4 million dollars. Services and statutory cost- the estimated cost of services required thought the project is $ 0.3 million dollars. Indirect costs These costs will include Overheads- the estimated costs of products and services which are difficult to subdivide and allocate is $ 0.2 million dollars General administrative costs- these costs are estimated at 0.05 million dollars throughout the project life cycle. Subcontractor- these costs are estimated at $ 0.2 million dollars. Below is a tabulation of above costs Item Total Costs( in Millions) Direct costs Equipment 0.3 Facilities 0.2 Fees and charges 0.05 Services and statutory cost 0.1 Salaries 0.2 Materials 0.3 Indirect costs Overheads 0.2 General administrative costs 0.05 Subcontractor 0.2 Variance costs 0.05 Profits 0.15 1.8 The budgetary assumptions of the project were; a) There will be no significant technological advancements to interrupt the project within the specified period of time. b) There will be no significant inflation within the period. c) There will be no significant increase in traffic within the period. For the entire project, the cost is estimated to be $ 1.8 million dollars. This budget is estimated to cover the entire project including profit margin. This section of the project outlines the processes, procedures and documentation for planning, expediting, managing and controlling the projects costs. In our project we have identified correct and accurate measures of performance which include monthly review of the project to establish the level and amount of work done against the budget. During the project implementation, the project manager will monitor the utilization of the available resources with the help of the project accountant to establish possible cost variances. This constant monitoring of costs will ensure that the highest level of accuracy which is required for this specific project is achieved. As per the estimated cost breakdown provided above, which serves as a guideline for the entire project, has been established to ensure correct adherence to the cost baselines as per the WBS. For the project we have adopted financial reports, monthly reviews and variance reports as our key reporting deliverables. These report formats help to ensure our key performance indicators are progressively captured as the project is being implemented. Also costs reporting will be done using the Earned value analysis and forecast analysis on a monthly basis. The approval of budget utilization for the project will be provided by the project manager and project accountant as they are the leaders in this specific project. Part B Earned value management analysis This is a mathematical technique with which you can measure actual performance of the project and monitor the project in terms of schedule and costs. Earned value of the project Earned Value (Scenario A) Planned value(Scenario A) Variance equipment $400,000 $ 300,000 -100,000 facilities $50,000 $200,000 150,000 fees and charges $28,000 $50,000 22,000 human resources $280,000 $200,000 -80,000 materials $230.000 $300,000 70,000 The estimated percentage of work completed is 70 percent. The earned values of some costs are over budget while others are within the budget. Depending on the amount of work performed like equipment, there will be no purchasing equipment in the remaining period. The remaining part of the project is testing which will require minimal resources to implement. Forecasting Based on the computations of EVM it is possible to forecast performance of the project. The forecast will be based on the current performance of the work done on the project. The percentage of work completed is 70 percent with over 55 percent of the budget being depleted. As a project manager, I forecast the project will be completed in good time to allow sufficient time for handover. The project is on budget and my expectation is that the remaining portion of the budget will cater for the remaining work. Budget performance report Item Planned Total Costs( in Millions) Actual Costs( in Millions) Variance( in Millions) Direct costs Equipment 0.3 0.4 0.1 Unfavorable Variance Facilities 0.2 0.25 0.05 Unfavorable Variance Fees and charges 0.05 0.055 0.005 Unfavorable Variance Services and statutory cost 0.1 0.15 0.05 Unfavorable Variance Salaries 0.1 0.3 0.2 Unfavorable Variance materials 0.3 0.32 0.02 Unfavorable Variance Indirect costs Overheads 0.2 0.18 -0.02 Favorable variance General administrative costs 0.05 0.04 -0.01 Favorable variance Subcontractor 0.2 0.18 -0.02 Favorable variance Variance costs 0.05 0.05 0 No variance Generally, for the entire project we are over budget of $ 0.375 million dollars. These changes in planned costs were as a result of changes in the operating environment of the project and increase in overheads and salaries paid during the period. Part C Financial Report Item Planned Total Costs( in Millions) Actual Costs( in Millions) Variance( in Millions) Direct costs Equipment 0.3 0.3 0 Facilities 0.2 0.2 0 Fees and charges 0.05 0.05 0 Services and statutory cost 0.1 0.1 0 Salaries 0.1 0.106 0.006 materials 0.3 0.276 -0.024 Indirect costs 0 Overheads 0.2 0.17 -0.03 General administrative costs 0.05 0.05 0 Subcontractor 0.2 0.2 0 Variance costs 0.05 0.05 0 Project Variances explanations Salaries The variance in salaries budgeted versus the actual cost was as a result of two project staff members who were reassigned to another project and the original budget allocation was not transferred. Also during the implementation phase it was noted that the wages of contractual staffs was over stated and the wages were revised downwards. Materials The materials which were used during the project reduced considerably due to some materials which were budgeted for the repairs were not purchased hence the save. Also there was considerable discount which was offered by the supplier for the material supplies. Overheads Due to change in scope of the project, there was considerable change in overheads as compared to the planned costs. The scope of the project reduced the amount of work to be done with about 10 % of the planned work hence the save in overheads. Date Description of problem/opportunity Recommended Action for next time/project Lesson Learned Raised By 1 During the implementation phase, there was a reduction of Market Prices of the key materials required for the project. Proper market survey should be carried out to ensure that the correct costs are captured in the estimated costs. Project Manager 2 Also during the implementation phase there was a considerable discount offered by the supplier. During the market survey, the project manager should be advised to capture any allocation for possible cost save as a result of discounts at the planning stage. Project Manager 3 Determination of the cost of overheads was a challenge because of the nature of the project Proper analysis of all the costs should be performed during the planning stage to properly categorize to ensure there is no duplication or the costs not captured in the right category Project Accountant 4 During acquisition of materials we noticed that fluctuations of exchange rates resulted to cost saves. Proper analysis of current exchange should be done during project planning to ensure that we hedge against adverse loses as a result of exchange rates Project Accountant References Watt, A. (2014). Project Management. Retrieved from https://opentextbc.ca/projectmanagement/chapter/chapter-12-budget-planning-project-management/ Wvi.org, (2017). Project Financial reporting. 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