Running head: ASSIGNMENT CUM TEST 5 1

GRADUATE CERTIFICATE IN PROJECT

MANAGEMENT

PCM115- PROJECT SCHEDULE AND COST CONTROL

MANAGEMENT

SUBMITTED TO- PROF. ABHIJEET KUMAR SINGH

SUBMITTED BY- JASPREET KAUR

STUDENT ID- A00134620

DATE- 1ST DECEMBER 2021

ASSIGNMENT CUM TEST 5 2

Q1. Discuss the three methods of estimating costs in detail.

ANS. ESTIMATION OF COSTS: Estimating cost is an integral part of any project because

we come to know about how much finance is required for investing in the activities of the

project. It always helps the project manager in getting information about the financial

resources of the project. Basically, there are three methods of estimating costs:

1. ANALOGOUS METHOD: In this method an estimation of costs is established from

similar type of projects based on data available about the previous project. It involves

expert judgement for the establishment of reliable data. This technique of estimation is

used when there is very limited information present regarding the project duration and

cost acquired for doing the activities in the project.

2. PARAMETRIC ESTIMATING: Parametric estimating is indeed a facts and figures

approach for computing the estimated level of resources or timeframe required for

completing and finish a project, any operation, or a piece of a project. A collection of

previous data is necessary to compute the cost or duration per parameter. Costing method

is among the four basic methodologies used by project management firms to predict a

project's cost, duration, and effort.

3. BOTTOM-UP ESTIMATING: Bottom-up budgeting entails evaluating tasks at the most

granular level possible. Such estimations then are added together to obtain aggregate

figures. Although bottom-up predictions take time to achieve, they are much more

trustworthy than similar or parametric estimates. There three types of bottom-up

estimation such as resource required estimation, time needed and costs required for the

projects.
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Q2. Discuss the different project cost estimation issues in the project.

ANS. COST ESTIMATION ISSUES: Various issues and concerns comes across while

doing the cost estimation in the project which we should consider otherwise it will create a

hindrance in the process of the project:

1. AVAILABILITY OF VALID DATA: one of the main reasons of any issue under cost

estimation is availability of valid data because sometimes the data collected from

various sources may invalid or not as per the requirements of the project. Invalid data

always creates problems in the cost estimation of the project.

2. COMPLEX COST CALCULATIONS: When calculation is very complex and long

then it always become an issue for the project manager regarding how he should

calculate exact amount required for finishing the project activities. Inaccurate

calculations often lead to under and overspending of money.

3. DISCREPANCIES IN DATA: Project manager always use various strategies of

estimating costs from different type of data gathered from previous or similar kind of

projects which is always not necessary going to be correct. So, cost estimation done

based on distinct data may lead to further miscalculations.

4. INACCURATE QUANTITIES: Estimations are done after considering the material

available for the project but sometimes the quantity of materials shown by the material

handler is not correct which becomes the main reason of mistakes in the cost

estimation.

5. USE OF SPREADSHEETS: Many of the project managers are still using

spreadsheets for doing the cost analysis instead of using excel which is a best software

for doing complex calculations and keeping record of years about the projects.
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Q3. Discuss the following concepts briefly:

ANS: A) Vendor Build Analysis: Vendor bid analysis is the method for determining the

budget of the project by analyzing all or most of the proposals submitted by suppliers. This

can be accomplished by considering the project's cost.

B) Value Engineering: Value engineering is a methodical project management

philosophy that is widely used. Value engineering is abbreviated as "VE." Value

engineering is a systematic effort in project management to maximize the project's

entire value. Value management entails five steps, including: 1) Recognize the issue;

2) Consider several options 3) Compare and contrast the various options 4)

Extensively explore the chosen options 5) Determine the best approach and provide

suggestions.

C) ABC: Because it measures the cost and performance of activities, resources, and cost

items, activity-based costing is an important way of project management. It's a cutting-

edge method for allocating indirect expenditures. The link across costing system and

occupations is identified using activity-based costing.

D) Time Value of Money: TVM stands for time value of money. According to TVM, the

value of money diminishes over time since money available now is more valuable than

the same amount of money received in the future. Because multiple forms of financial

flows occur in projects, it is critical for project managers to comprehend the idea of

time value of money. As a result, all of these cash flows must be included in order to

make accurate estimates.

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E) Analyzing Reserve Needs: The project manager is responsible for analyzing all

backup requirements for the project. The project manager concentrates on two basic

reserves when analyzing reserve needs:

1) Contingency Reserve-During risk analysis, a contingency reserve is calculated.

2) Management Reserve- The size of this reserve is determined by the degree of

uncertainty.

Q4. Discuss the value and benefits of budget optimization.

ANS: BUDGET OPTIMIZATION: Budget optimization is the method by which marketers

specify a budget for an ad campaign which will be distributed amongst ad sets in order to

reward the outstanding employees. Advertisers can increase the total value of their campaign

by allocating more budget to the best-performing ad sets.

THE VAUE AND BENEFITS OF BUDGET OPTIMIZATION:

• A two additional capital project portfolio is created and budgeted for implementation.

• A year-round budgeting procedure is used to balance numerous conflicting goals.

• Utilities used a construction management optimization method to develop, assess, and fine-

tune the portfolio's budget.

• At given budgeted levels, a computer-based mathematical method is employed to optimize

all conceivable expenditure portfolios to maximize value and minimize risk.

BENEFITS:

1. Financial approach is established and conveyed.

2. Budgeting is optimized effective Organizational pattern is consistent.

3. Hazard and risk criteria and sensitivity are acknowledged.

4. Timescale and buying power are enlarged.

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5. Project characteristics are considered.