Project Times and Cost - Assignment Example

? Project Times and Cost Why accurate estimates are critical in effective project management Project control becomes ineffective without accurate time and cost management. This is because the inaccuracy involved may result into either a profit or a loss. As nobody would like to make losses in any project they are involved in, there is need for control of such inaccuracies so that there would not be any wastage that would result into losses (Medica, 2011). At the same time, inadequacy should be avoided so that the project can run smoothly once it is started without stoppages. One would need to consider time and costs in project management since these are the major inputs that need accuracy. To control any project well, accuracy of estimates in mandatory since good project control entirely depends on the extent to which the estimates are accurate. There is no need for under/overruns in a project. In fact, poorly managed project shows such symptoms majorly because of inaccuracies that existed during estimation or estimations were totally absent Project managers usually need to make good and informed decisions concerning the amount of the estimates that they require for the specific projects. For instance, in a project to construct a building, the construction manager would need to make accurate estimates of all the materials required so that cost estimates can be made. This will enable the manager to make informed decision on how much the cost of completing the construction would be without making any losses. This show how important accurate estimates are in decision making. Another important factor to know in a project is how long the project would take as well as the total cost that the project will need to completion (Michael, 2008). These are questions that can only be responded to well by carrying out accurate estimation of both costs and time. Resources are very scarce, therefore the available ones should be planned well with to meet the intended needs. This can only be achieved in project management by good management of time and financial resources through accurate estimates. To control and manage a project well, one needs to develop cash flow needs. This will enable the project manager to predict the payback period of the project and even make the breakeven analysis. From the payback period, is easy to know whether the project is viable or not. It also becomes easy to know how much funds are required for the project maintenance and to achieve all these correctly, accurate estimate is required. Any good managed project requires a time phased budget. To develop this and establish a baseline for the project, accurate estimates must be done. The time passed budgets include the prices of different materials and how they change with time. Time might cause changes in the prices of materials; therefore, proper estimates need to be done to give accurate allowance for such adjustments when they occur in the future. Errors normally occur to anyone doing anything. The only difference is to what significant is the error to the project. Normally errors occur when estimations are not done correctly or just not done at all. To avoid or reduce errors in a given project, there is need for an accurate estimation to be done. This also helps in reducing under/overruns. The differences between bottom-up and top-bottom estimation techniques One must first appreciate that both bottom-up and top-bottom are project estimation techniques. However, bottom-up technique proves more accurate as compared to the top-bottom technique and this marks the major difference between the two (Mark, 1997). The bottom-up technique, however, takes much time to carry out in as much as it is accurate. The top-bottom technique on the other hand is very fast to execute but less accurate. Bottom up technique is carried out by thoroughly by estimating each and every package of work in a WBS. This technique is normally applied once the management and its client are already committed to the project and require accurate estimates. On the other hand, top-bottom technique of project estimation requires that the project management has to rely on the data from a similar previous project in order to develop estimates for the current project. This normally gives inaccurate estimates since there is a lot of parity in the material specification, cost and variation that may be caused by time difference. Such a technique like the top bottom is normally used in such projects where materials are normally static, or do not change much, such as construction projects. Such projects must also have very few unknowns in the requirements so that they can just be easily predicted in estimation. An example to illustrate this point is that, once we establish that the amount that was used to construct a particular road was $1 million, when we want to construct a similar road as our current project, the cost estimate will be around $1 million. This estimation considers that the materials to be used are similar and the cost is the same in the regions. There will be no extra material added or removed and inflation rate in also taken into consideration. As can be seen, the management only needs to decide they are going to make a similar construction then their estimation work is just to take the cost of the previous project and assume it for the current project. This is why this estimation technique is easy and fast. It therefore fits construction projects as well as small software projects. On the other hand, the manager that uses the bottom up estimation technique will need to do the estimation systematically by considering every material and time requirement for the project to be executed. This process is very long, tedious and time consuming in as much as it is the most accurate and the most preferred. It is therefore ideal for large software projects that require a lot of deliverables. It is also the best when the current costs and time estimation are necessary for a better control of a project. Calculations for the dream house The size of the house = 2,900 sq. feet. The price of the house per sq. feet = $120 Therefore, the total cost of the house = $(120 x 2,900) = $348,000 This is the average price of a lot and a house similar to the one that the family of Mr. Serge would like to acquire. This cost is estimated to be the 100% cost for the house. When the constructors complete the house on behalf of the family, the family will need to part with the following calculations of cash; Excavation and framing complete =24% If 100% rep. $384,000 Then 24% represent $? 24 x384, 000/100 = $92,160 Roof and fireplace complete = 8% 8 x 384,000/100 = $30,720 Wiring roughed in = 3% 3 x384, 000/100= $11,520 Plumbing roughed in = 6% 6 x384, 000/100 = $23,040 Siding on =5% 5 x384, 000/100 = $19,200 Windows, installation, walks, plaster and garage complete = 17% 17 x 384, 000/100 = $65,280 Furnace installed = 9% 9 x 384, 000/100 = $34,560 Plumbing fixtures installed = 4% 4 x 384, 000/100 = $15,360 Exterior paints, light fixtures installed, finished hardware installed = 10% 10 x 384, 000/100 = $38,400 Carpet and trim installed = 6% 6 x 3840 = $23,040 Interior decorating = 4% 4 x 3840 = $15,360 Floors laid and furnished = 4% 4 x 3840 = $15,360 The total cost of building by using constructors therefore would be the sum of all the individual costs. Total cost = (92,160+30720+11520+23040+19200+65280+34560+15360+38400+23040+15360+15360) = $384,000 If the family use their talents to do the plumbing and decorations, the total cost will reduce in this way; The total cost by constructors = $384,000 Plumbing roughed in = $23,040 Plumbing fixtures installed = $15,360 Interior d3ecorating = $15,360 Total cost of work done by family= $(53,760) Total cost when the family do some work= $330,240 Router systems project The estimated costs for, a) Designs = 40% x $600,000 / 100% = $240,000 b) Programming = 20% x $600,000 /100% = $120,000 c) In-house testing = 40% x $600,000/100 = $240,000 References Mark, D. H. (1997). Estimating the Relative Roles of Top-down and bottom-up Forces of Insect Herbivore Population. Aclassic Study Revisited Journal , 94 (17). Medica, J. (2011). Improving the Estimation Process. A Journal of the Project Times . Michael, C. N. (2008). How to Accurately Estimate and Forecast In Project Management. The journal of the TechRepublic . Read More