10 Questions
What is the primary purpose of a Rough Order of Magnitude (ROM) estimate?
To provide a rough estimate of costs for project selection decisions
What is the range of accuracy for a budgetary estimate?
-10%, +25%
When is a definitive estimate typically prepared?
Later in the project, <1 year out
What is the advantage of parametric models, according to Barry Boehm?
They do not suffer from the limits of human decision-making
What is the primary benefit of using a bottom-up estimate?
It provides a detailed breakdown of costs
What is the purpose of a cost baseline?
To establish the project budget
What is the role of cost estimation in project budgeting?
To establish the project budget
What is the benefit of using cost estimation tools and techniques?
To increase the accuracy of cost estimates
What is the purpose of COCOMO II?
To estimate software development costs
What is the advantage of using analogous estimates?
They are based on actual costs of previous, similar projects
Study Notes
Project Cost Management
- Project cost management involves ensuring a project is completed within an approved budget.
- It includes processes for cost estimation, budgeting, and cost control.
Importance of Project Cost Management
- IT/SW projects have a poor track record of meeting budget goals, with average cost overruns ranging from 180% to 43%.
- Accurate cost estimates are crucial to avoid cost overruns.
Reasons for Cost Overruns
- Unrealistic project cost estimates from the outset.
- Lack of emphasis on realistic estimates.
- Involvement of new, untested technologies.
- Biased estimation due to lack of experience.
Basic Principles of Cost Management
- Profits are revenues minus expenses.
- Life cycle costing estimates the cost of a project over its entire life.
- Cash flow analysis determines estimated annual costs and benefits for a project.
Typical Problems with Cost Estimates
- Developing estimates for large software projects is complex and requires significant effort.
- Estimates are often done at various stages of the project.
- Lack of experience among estimators.
- Bias towards underestimation.
- Unrealistic estimation due to management pressure.
Cost Budgeting
- Cost budgeting allocates project cost estimates to individual work items and provides a cost baseline for performance measures.
Cost Control
- Cost control involves controlling changes to the project budget.
- It includes monitoring project costs and managing changes to the project cost baseline.
Earned Value Management (EVM)
- EVM is a technique that integrates scope, time, and cost data to measure project performance.
- It determines how well a project is meeting its goals based on a baseline (original plan plus approved changes).
Types of Cost Estimates
- Rough Order of Magnitude (ROM) estimates: done very early in the project life cycle, provides a rough ballpark of cost for selection decisions, accurate to -25%, +75%.
- Budgetary estimates: done early, provides a more detailed estimate for budget plans, accurate to -10%, +25%.
- Definitive estimates: done later, provides detailed estimates for purchases and actual costs, accurate to -5%, +10%.
Cost Estimation Tools and Techniques
- Analogous or top-down estimation: uses the actual cost of a previous, similar project as the basis for the new estimate.
- Bottom-up estimation: estimates individual work items and sums them to get a total estimate.
- Parametric estimation: uses project characteristics to estimate costs.
Constructive Cost Model (COCOMO)
- COCOMO is a model for estimating software development costs, developed by Barry Boehm.
- Parameters include source lines of code or function points.
- COCOMO II is a computerized model available on the web.
This quiz covers the basics of project cost management, including the definition of cost, cost measurement, and the importance of accurate cost estimates in project management.
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