Cost and Value Management Principles
INF 337: Integrated Cost & Schedule Control
Cost and Value management is becoming a large part of companies competing in today’s market. According to the text, “projects and their effective management can provide organizations with a significant competitive edge through cost reduction, enhanced responsiveness, and overall value to customers.” (Venkataraman & Pinto, 2008, p. 1). In this paper we are going to focus on some of the techniques and how they can either help or hinder a project. Through information and examples we will explore the importance of work packages and the work breakdown structure (WBS), establishing a cost and schedule performance measurement baseline, earned value management (EVM) and how it relates to the project status, how the use of control charts affect status and value, and finally how effective change management processes can ensure a successful project.
There are multiple parts to an initial project startup. A project manager will identify a need, define a scope and then flow down into the work breakdown structure (WBS). “The WBS is a hierarchical structure in which all of the major phases of project work are organized in a logical manner.” (Venkataraman & Pinto, 2008, p. 32). This combines all aspects of the initial stages of project development and planning into one workable document. This becomes a base for the project manager to keep an eye on how the project is progressing as well as to relate the costs of the project at the different stages. The WBS is going to initially start with the overall project, broken down into deliverables and then into the separate work packages that relate to those deliverables. The three main types of WBS’s are product based WBS, organizational based WBS, and process based WBS. In my organization we are an aerospace part manufacturing plant and we produce a product that goes through numerous processes from start to finish. We use more of a hybrid WBS encompassing aspects from both the product and the process work based structures. Once a WBS is ready to be created it is a team effort that should consist of the project manager, additional affected departmental managers, all the way down to the personnel who are responsible for seeing the process or product building at that stage. When building a project in our organization our team consists of the project manager, department managers and a technician who is considered the subject matter expert for that stage in the product lifecycle.
Once the WBS is in it’s final development stages the work packages must be created. “Work packages serve as control point mechanisms for monitoring and reporting performance, in terms of whether associated tasks were completed according to specifications, on time, and within budget.” (Venkataraman & Pinto, 2008, p. 37). The work package is important not only to the specifications, the timeliness and the cost control, but also to identify who is responsible for each aspect of the project. This can help with the flow to ensure that the WBS maintains it proper flow, whereas if one area must be completed before another it assists the WBS in ensuring that the work is done in the correct path.
Once the overall work that has to be performed has been planned out it is time to create a cost and schedule performance measurement baseline. This will be used to develop our time-phased budget. There are numerous ways to estimate your costs at the beginning of a project. Some of the more common ways are ballpark estimates, feasibility estimates, definitive estimates, and comparative estimates. I am going to focus on comparative estimates as that is what most of my organizations projects use. The reason we use comparative estimates is because many of our projects revolve around product design and development. We fall under very stringent aerospace standards and so therefore our...
References: Arpan, C. (2013). Evm benefits and myths. Unpublished raw data, Ashford University, Retrieved from http://classroom.ashford.edu
Venkataraman, R., & Pinto, J. (2008). Cost and value management in projects. Hoboken, New Jersey: John Wiley & Sons, Inc. Retrieved from http://online.vitalsource.com/
Visitacion, M. (Sep 2007). Debunking commonly held evm myths. Contract
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