Lecture 01: Introduction to ICT Project

Management
Why is Project Management Important? (Simple Explanation)

 Some tasks are special and don’t follow normal work routines.
 Project management helps organize these tasks.
 Right people do the right work, on time, without wasting money.

What is a Project?
 A project is a unique, temporary task with a specific purpose and deliverable by a
specific date.
 Begins with a problem and ends with a solution.
 Evaluated based on whether it meets its goals.

Attributes of a Project
 Unique purpose
 Temporary
 Requires resources
 Has a sponsor/customer
 Involves uncertainty

Examples of IT Projects
 New reservation systems (e.g., ResNet by Northwest Airlines)
 Hardware/software upgrades
 New or enhanced business systems

What is Management?
 Management is guiding and organizing people’s work to achieve a goal.

Functions of Management

 Planning: Set goals and actions

 Organizing: Structure and assign roles
  Staffing: Hire and train people
 Directing: Motivate and lead
 Controlling: Measure and evaluate performance

What is Project Management?

 PMI (PMBOK): Application of knowledge, skills, tools, and techniques to meet
project requirements.
 Includes procedures, practices, technologies, and experience.

Software Project Management

 Ensures software is delivered on time, within budget, and meets requirements.

Project Stakeholders
Project Stakeholders are people or groups who are affected by or have an interest in the
project. This includes:

 Project sponsor – provides support and funding

 Project team – works on the project
 Support staff – helps with project tasks
 Customers – receive the final product or service
 Users – use the product or service
 Suppliers – provide goods or services for the project
 Opponents – may be negatively affected or oppose the project

Project Characteristics
 Clear objective – specific end result
 Finite – fixed start/end dates
 Limited – resources, time, budget
 Life Cycle – phases of the project
 Interdependence – cross-functional work
 Uniqueness – one-time effort
 Team-based – diverse expertise
 Subtasks – sequenced, non-repetitive
 Change – often a source of conflict
 Risk – expectations may vary
Potential for Conflict
 Resource conflict: limited people, time, money
 People conflict: change resistance
 Client vs. Organization vs. Public: differing expectations and priorities
 Project Manager: must manage conflicts

Negotiation & Conflict Resolution

 Win-Win: Understanding mutual needs, shared commitments
 Win-Lose: One party gains at another’s expense
o Often results in lose-lose: nobody is truly satisfied

Project Management Knowledge Areas (PMBOK)

Core Knowledge Areas:

 Scope Management – defines what’s included

 Time Management – ensures timely completion
 Cost Management – stays within budget
 Quality Management – meets project needs

Facilitating Areas:

 Human Resource Management – uses team effectively

 Communication Management – manages project information
 Risk Management – identifies and handles risks
 Procurement Management – manages external purchases

Integration Management:

 Coordinates all knowledge areas and project elements

The Triple Constraints

 Scope, Time, and Cost – all interconnected
 Project managers must balance all three
Primary Objectives of Software Project Management

 Deliver the needed results on time and within the planned budget.
 Balance trade-offs:
Performance depends on time and budget (i.e., better performance may need more
time or money).

 Implicit trade-offs: performance = f(time, budget)

Project Management & Software Practices

 Software Project Management (SPM) blends PMBOK (Project Management

Body of Knowledge) with software development methods.
 It applies general project management principles specifically to software projects.

Advantages of Project Management

 Responsive to clients and environment
 Timely decisions and centralized control
 Better coordination, quality, and morale
 Helps track schedules, costs, and quality
 Builds team skills and future project data

Disadvantages of Project Management

 Increases organizational complexity
 May lower personnel utilization
 Can create more managerial conflicts

"What is a benefit of project management?"

 A) Profits are increased in a project management environment.

✅ Possible, but not a direct or guaranteed benefit.
 B) Your organization will be more efficient with project management.
✅ This is a strong and correct benefit—improved efficiency is a direct and known
advantage.
 C) Project management increases the risk for power struggles.
❌ This is a disadvantage, not a benefit.
  D) Quality is increased in a project management organization.
✅ Also a correct benefit—project management helps improve quality.

✅ Correct Answer: B) Your organization will be more efficient with project

management.

This is the most directly stated benefit among the options.

02-Organizational Structures in Project

Management
Main Types of Organizational Structures

1. Functional Organization
o Staff grouped by function (e.g., finance, marketing).
o Clear hierarchy within departments.
o Project manager has little authority.
o Team members report to functional managers.
o Suitable for projects with high stability and repetition.
2. Project zed (Project-Based) Organization
o Staff grouped by projects.
o Project managers have full authority.
o Teams are formed for specific projects and disbanded after completion.
o Best for dynamic, time-sensitive projects.
3. Matrix Organization
o Hybrid of functional and projected structures.
o Team members report to both functional and project managers.
o Allows flexibility and dynamic team collaboration.
o Presents challenges such as dual reporting and conflicting demands.

Parameters for Each Organization Type

 Organizational Unit
 Key Players
 Roles and Responsibilities
 Structure & Communication Flow
 Pros and Cons

Groups, Teams, Committees

  Group: People working on the same task but doing it separately.
 Team: People working together to solve a problem.
 Project Team: People working together to complete a project goal.
 Committee: People who review things and give suggestions.

When to Use Which Structure

Functional Organization

 Suitable for:
o Clear, stable projects with little change.
o Clear role definitions.
o Independent work (e.g., testing vs. design).

Project or Matrix Organization

 Suitable for:
o Projects with high uncertainty or evolving requirements.
o Need for cross-functional collaboration.
o Use of new technologies.

Key Roles in Project and Matrix Organizations

 Project Manager
o Plans, leads, monitors, and communicates project goals.
o Resolves conflicts and reports to upper management.
o Maintains client communication.
 Team Member
o Completes assigned tasks.
o Communicates issues and supports peers.
 Functional Manager
o Supervises staff in a functional setting.
o Less influence in project zed environments.
 Upper Management
o Oversees departments and projects.

Responsibilities
Project Manager

 Define objectives, schedule, and budget.

 Create project plans (SPMP).
  Build motivated teams.
 Monitor and report project progress.
 Handle conflicts and manage change.

Team Members

 Perform technical tasks efficiently.

 Communicate and collaborate with teammates.
 Identify and report potential issues.

Additional Roles
 Project Management: Coach, Team Leader, Planner, API Liaison.
 Meeting Management: Facilitator, Minute Taker, Scribe.
 Development: Analyst, Designer, Programmer, Tester, Maintainer, Trainer, Editor,
Webmaster, Config Manager.

Group Assignment Tasks

1. Develop an Organizational Chart for:
o Your Faculty.

o Your University (e.g., SEUSL – South Eastern University of Sri Lanka).

Here’s a simple and clear summary of Chapter 3: Project Integration Management in
everyday language:

✅ Chapter 3: Project Integration Management

(Simplified)
🔄 Key Steps in Project Integration Management:

1. Start the Project (Initiating)

 Develop Project Charter

→ A document that gives official approval to start the project.
 Create Preliminary Scope Statement
→ A rough idea of what the project will deliver (its goals, limits, etc.)

2. Plan the Project (Planning)

 Develop Project Management Plan

→ One big plan that combines all smaller plans (like time, cost, quality plans, etc.)
3. Do the Work (Executing)

 Direct and Manage Project Work

→ Actually carry out the tasks and produce the project’s deliverables.

4. Track and Manage Changes (Monitoring & Controlling)

 Monitor Project Work

→ Check if everything is going as planned and fix issues if needed.
 Manage Changes (Integrated Change Control)
→ Handle any changes to plans or deliverables in a proper way.

5. Finish the Project (Closing)

 Close the Project

→ Wrap up everything, deliver the final product, release team, and write lessons
learned.

📌 Key Idea:

Project Integration Management is like being the team captain – making sure all parts of the
project work together smoothly from start to finish.
Here’s a simplified version of the section on Strategic Planning and Project Selection:

📈 Strategic Planning and Project Selection (Simplified)

🎯 What is Strategic Planning?

 It’s about thinking long-term.

 Organizations set future goals, watch for trends, and figure out what new products
or services they might need.

� SWOT Analysis

A tool to help in planning by analyzing:

 S – Strengths (What we’re good at)

 W – Weaknesses (What we need to improve)
  O – Opportunities (Chances to grow or improve)
 T – Threats (Possible risks or problems)

📌 Steps in Project Selection

1. List Potential Projects – Gather ideas for new projects.

2. Evaluate Them Realistically – Use proper methods to decide which are worth doing.
3. Start the Best Ones Officially – Create a project charter to formally begin the
chosen project.

✅ Key Takeaway:

Strategic planning helps organizations choose the right projects that match their goals, using
tools like SWOT analysis and project selection methods.

Here is a simplified explanation of the content you shared:

✅ Methods for Selecting Projects (Simplified)
Organizations often have more project ideas than time or money, so they need ways to
choose the best ones.

1. 🔍 Focusing on Broad Organizational Needs

Some IT projects are clearly useful even if it’s hard to show exact financial benefits.

Three key things to check:

 Is the project needed?

 Is there money for it?
 Do people really want it to succeed?

� Quote to remember:

"It’s better to measure gold roughly than to count pennies precisely."

2. 🗂� Categorizing IT Projects

Projects can be grouped by:

 What they solve:

o A problem (e.g., fixing a broken system)
o An opportunity (e.g., launching a new app)
o A directive (e.g., required by law or leadership)
 Time needed:
o How long it takes
o When it’s needed
 Priority:
o Is it high, medium, or low priority?

3. 💰 Financial Analysis of Projects

Money often matters when selecting projects. Here are 3 common methods:

a) Net Present Value (NPV)

 NPV compares the future money the project makes or saves to its costs today.
 It "discounts" future income to today's value.
 If NPV is positive, the project is likely worth doing.
  The higher the NPV, the better!

b) Return on Investment (ROI)

 ROI = (Gain from Project − Cost of Project) ÷ Cost of Project

 Shows the profit percentage from the investment.

c) Payback Analysis

 Tells you how long it takes to earn back the money you spend on the project.

📌 Summary:

To pick the right project, look at:

 Need
 Support
 Money
 Type
 Time
 Priority
 Financial return (NPV, ROI, Payback)
Here's a simple explanation of the concepts related to NPV, ROI, and Payback Analysis:
📊 NPV, ROI, and Payback – Simplified
🔢 1. Net Present Value (NPV)

 NPV = Present value of benefits – Present value of costs

 It tells you how much profit (or loss) a project makes, in today’s money.
 To calculate it:
1. Estimate all future costs and benefits of the project.
2. Choose a discount rate (e.g., 10%) to convert future values to today's values.
3. Subtract total costs from total benefits.
 If NPV > 0 → project is worth doing.
 If NPV < 0 → project will lose money.

📌 Note: Some companies count Year 0 as the investment year; others start from Year 1.

💰 2. Return on Investment (ROI)

 ROI = (Profit ÷ Cost) × 100

 Or more formally:
ROI = (Total discounted benefits − Total discounted costs) ÷ Costs
 Higher ROI = Better investment

✅ Example 1: Ravi's House

 Bought for Rs 250,000

 Sold for Rs 325,000
 Profit = Rs 75,000

ROI = (75,000 / 250,000) × 100 = 30%

✅ Example 2: Kurien’s Stock

 Bought 500 shares at Rs 20 = Rs 10,000

 Price rose to Rs 27 → Value = Rs 13,500
 Profit = Rs 3,500

ROI = (3,500 / 10,000) × 100 = 35%

� 3. Payback Period

 How long it takes to get back the money you spent on the project.
 You track the net cash flow each year.
 Payback happens when total cash inflows = total cost.
✅ Shorter payback period is better, especially for IT projects.

✅ Summary Table:

Method What it shows Formula Good result

NPV Net profit in today's money Benefits – Costs Positive value
ROI Profit percentage (Profit ÷ Cost) × 100 High %
Payback Time to recover cost Years to break even Shorter time

Here’s a simple and short explanation of the key concepts:

📘 Project Integration Management – Summary

📄 Project Charter

 A formal document that starts the project.

 It states the project’s goals, who is involved, and gives the project manager
authority.
 Must be signed by key stakeholders.
📋 Preliminary Scope Statement

 A document that defines what the project will deliver.

 Helps avoid scope creep (unplanned changes or additions).
 Starts with a basic version at the beginning, then gets more detailed later.

📘 Project Management Plan

 A document that combines all planning documents into one.

 Guides how the project will be executed and controlled.
 Created after the charter and scope statement.

� Common Elements in a Project Management Plan

1. Introduction – What the project is about.

2. Project Organization – Who does what.
3. Processes – How the work will be managed and done.
4. Work, Schedule & Budget – Tasks, timeline, and costs.

Here’s a simple explanation of the contents in a Software Project Management Plan

(SPMP) based on the image:

📑 Sample Contents of SPMP (Software Project Management Plan)

1. Overview

 What it covers:
o Purpose, goals, assumptions, project outputs
o Time and cost summary
o How the plan might evolve

2. Project Organization

 What it includes:
o Who is involved (internal and external)
o Structure of the team
o Roles and responsibilities
3. Managerial Process Plan

 Covers management activities:

o Starting the project (staffing, training, acquiring resources)
o Work plan (tasks, time, cost, resources)
o Control plan, risk management, and closure steps

4. Technical Process Plans

 Focuses on how the work will be done:

o Process methods, tools, and techniques
o Infrastructure setup
o How the product will be accepted (product acceptance)

5. Supporting Process Plans

 Additional support activities:

o Managing versions (configuration)
o Testing and verification
o Quality checks
o Solving issues
o Handling subcontractors
o Improving processes over time

📋 Simple Summary: Stakeholder Analysis

A stakeholder analysis is used to understand people involved in a project. It includes:

 ✅ Names & organizations

 🎯 Roles in the project
 ℹ� Important details about each person
 📊 Level of influence and interest
 � Tips to manage and work well with them

It helps keep relationships smooth and the project on track.

Here’s a simple summary of the Sample Stakeholder Analysis from the image:

🔑 Key Stakeholders and How to Manage Them:

 Name Role Interest & How to Manage
Influence
Ahmed Project Sponsor (Senior Very High / Very Keep him informed and follow his lead quickly.
Management) High
Susan DNA Expert (Project Team) Very High / Expert Let her review and lead testing; allow remote
work.
Erik Lead Programmer High / High Keep him happy (e.g., mention food); he’s
hard to replace.
Mark Hardware Vendor Very High / Low Give early notice for hardware delivery.
David Internal Project Manager Low-Med / Low- Let him know this project is priority; learn
Med from him.

� Purpose: This analysis helps the team understand each person's role, influence, and the
best way to work with them for project success.

Here is a simple summary of the content you provided on Project Integration

Management:

✅ Project Execution

 Involves doing the actual project work as per the plan.

 Most time and money is spent here.
 What you produce (the product/result) happens during execution.

🔄 Planning and Execution Go Together

 You can’t plan without thinking about how things will be done.
 Team input is important to make practical and realistic plans.

📊 Monitoring and Controlling Work

 Always track progress and changes.

 Collect data, measure performance, and share updates.
 Take corrective (fix issues) or preventive (avoid future issues) actions.

🔁 Integrated Change Control

 Goals:
1. Guide helpful changes.
2. Confirm when a change has happened.
 3. Manage changes smoothly.
 A baseline is the approved plan plus any approved changes.

💡 Modern Change Control

 Old Way: Stick exactly to the plan.

 Problem: Plans were often wrong or incomplete.
 New Way: Communicate and adapt to change—many changes are good!

🛠� Change Control System

 A formal method to approve and track changes.

 Defines who can make changes and how to make them.

⚙� Configuration Management

 Keeps product descriptions accurate and complete.

 Tracks and controls all product versions, changes, and documentation.
 Includes audits to ensure everything matches requirements.

🏁 Closing Projects

 Final step: wrap everything up.

 Outputs:
o Administrative & contract closures.
o Final product delivery.
o Updates to organizational knowledge.

💻 Using Software Tools

 Word processors: write documents.

 Presentation software: share info visually.
 Spreadsheets: track data and costs.
 Email/Web tools: communicate.
 Project management tools: integrate all planning and tracking.
 BSM tools: track full business processes.
📚 Chapter Summary (In Short)

Project Integration Management Includes:

1. Project charter
2. Preliminary scope statement
3. Project management plan
4. Executing the plan
5. Monitoring work
6. Managing changes
7. Closing the project

Chapter 4: Project Scope Management:

📌 What is Project Scope Management?

 Scope = All the work needed to create a project’s products.

 Deliverables = The outputs of the project (e.g., software, documents, hardware).
 Scope management ensures we define what's included in the project—and what’s
not.

� Key Scope Management Processes:

1. Scope Planning
– Decide how to define, check, and manage scope.
2. Scope Definition
– Add details to the initial scope from the project charter.
3. Creating the WBS (Work Breakdown Structure)
– Break big tasks into smaller, manageable pieces.
4. Scope Verification
– Get formal approval from stakeholders on the defined scope.
5. Scope Control
– Handle scope changes carefully so they don’t ruin the budget or schedule.
Here is a simple and short summary of Chapter 4: Project Scope Management:

📌 What is Project Scope Management?

 Scope is all the work needed to complete a project.

 A deliverable is a final product or result (e.g., reports, software).
 Scope management ensures we include only the required work.

🔍 Main Processes in Scope Management:

1. Scope Planning
– Plan how to define, verify, and control scope.
2. Scope Definition
– Use inputs like the project charter to create a detailed scope statement.
3. Create WBS (Work Breakdown Structure)
– Break down the project into smaller tasks for better planning.
4. Scope Verification
– Get formal approval of project deliverables from stakeholders.
5. Scope Control
– Manage and control changes to the project scope.
📄 Scope Management Plan

 Describes how the scope will be managed throughout the project.

 Reviewed with the sponsor to ensure it meets expectations.

� WBS (Work Breakdown Structure)

 A structured way to break the project into smaller parts (work packages).
 Helps with planning time, cost, and resources.
 Can be shown as a chart, table, or mind map.
 WBS Dictionary explains each WBS item in detail.

� Mind Mapping for WBS

 A visual way to brainstorm and structure ideas.

 Helps in organizing thoughts, especially for complex projects.
 Tools like Edraw or Blumind can help create mind maps.

✅ Scope Verification

 Confirm that all work and deliverables are completed and accepted.
 Often done through inspections and sign-offs.

⚠� Scope Control

 Prevents unwanted changes to project scope.

 Uses systems like change control and configuration management.

⭐ Best Practices

 Keep scope realistic.

 Involve users early and often.
 Use existing tech when possible.
 Follow standard project management processes.
🛠� Tools That Help:

 Word processors – for scope documents.

 Spreadsheets – for analysis and charts.
 Project software – for WBS and schedules.
 Communication tools – to keep everyone informed.

Topic 06: Project Cost Management:

Here is a simple and short summary of Topic 06: Project Cost Management:

💰 What is Project Cost Management?

 It ensures the project is completed within the approved budget.

 Involves estimating, budgeting, and controlling costs.
 Helps use financial resources wisely and keeps stakeholders confident.

🎯 Why Is It Important?

1. Financial Viability – Avoids going over budget.

2. Resource Optimization – Uses money, people, and materials efficiently.
3. Stakeholder Confidence – Builds trust through clear cost control.
4. Risk Management – Prepares for cost-related risks.
5. Strategic Alignment – Supports company-wide financial goals.

🔑 Key Concepts & Terms

 Cost: What you give up (money, time, effort) to get something.

 Profit = Revenue – Cost
 Profit Margin = (Profit / Revenue) × 100
 Life Cycle Costing: Total cost from development to retirement.

💸 Cost Estimating Types

Estimate Type When Used Accuracy Range

ROM (Rough Order) Very early in project -50% to +100%
Budgetary 1–2 years before project ends -10% to +25%
 Definitive 1 year or less before end -5% to +10% (most accurate)

⚠� Top Reasons for Cost Overruns

1. Inaccurate estimates
2. Poor planning/design
3. Unexpected/hidden costs
4. Change orders
5. Scheduling issues
6. Lack of skilled workers
7. Poor communication or admin errors

📊 Cost Management Processes

1. Cost Estimating – Predict how much each part of the project will cost.
2. Cost Budgeting – Assign money to work items and set the cost baseline.
3. Cost Control – Monitor and manage changes to stay on budget.

📉 Cost of Software Defects

 Fixing errors early is much cheaper than fixing them later.

 Example: $1,000 to fix in requirements phase vs $30,000 post-release.

📈 Earned Value Management (EVM)

 Tracks how well the project is performing in terms of cost and schedule.
 Helps detect problems early.

💻 Tools for Cost Management

 Word processors – for documentation.

 Spreadsheets – for calculations and charts.
 Project software – for creating WBS and tracking budgets.
 EVM & Portfolio Management Tools – for monitoring cost and performance.

Here's a simple and short summary of the remaining content:

📄 Cost Management Plan

 A document that explains how the project will handle cost changes.
 Helps manage supplier proposals that may be higher or lower than expected.
 Focuses heavily on labor costs, which are a big part of total project cost.

👷♂� Labor Estimation

 Managers estimate how many people or hours are needed by:

o Department
o Skill level
o Project phase

📊 Departmental Headcount Planning

 Example: Northwest Airlines planned the maximum number of people per

department per year.
 Contractors are used less often because they cost more than in-house staff.

� Why Supporting Details Matter

 Always include:
o Assumptions
o Project scope
o Work Breakdown Structure (WBS)
 This makes it easier to update cost estimates or use them for similar future
projects.

The table shows maximum departmental headcounts by year for a project at Northwest
Airlines from 1994 to 1998. Here's a quick summary of the data:

�💼 Department-wise Summary:

Department Total Headcount (1994–1998)

Information Systems 116
Marketing Systems 15
 Reservations 90
Contractors 6
Overall Total 227

📅 Year-wise Headcount Summary:

Year Total People Assigned

1994 41
1995 66
1996 72
1997 25
1998 23

📌 Key Points:

 Peak staffing occurred in 1996 with 72 people.

 Information Systems had the largest headcount overall.
 Use of contractors was minimal and dropped to zero by 1997.
 Consistent headcount in Marketing Systems across all years.

Here's a simplified summary of the key concepts from the section "Cost Estimation Tools
and Techniques" and related topics:

🛠� Cost Estimation Tools and Techniques:

1. Analogous (Top-Down) Estimating

o Uses the actual cost of a similar past project.
o Fast and low cost, but less accurate if the projects aren't very similar.
2. Bottom-Up Estimating (Activity-Based Costing)
o Estimates each activity or task individually and adds them up.
o More accurate, but time-consuming and expensive to develop.
3. Parametric Modeling
o Uses mathematical models based on project parameters (e.g., cost per line of
code or workstation).
o Useful when historical data is available and reliable.

⚠� Typical Problems in IT Cost Estimating:

 Estimates made too early without full requirements.

 Inexperienced estimators or lack of data.
 Bias toward underestimation, especially by senior staff.
 Pressure to lower estimates for funding approval or winning bids.
  Management clings to original estimates, even after changes.
 Poor communication from the project manager (PM).

📝 Tips for Creating a Sample Cost Estimate:

 Understand why the estimate is needed (budgeting, bidding, planning).

 Collect data, define assumptions, and note scope and WBS details.
 Use a cost model (spreadsheet or tool) to make updates easier.
 Always document your process for future reference.

Here is a simplified breakdown of the Surveyor Pro Project Cost Estimate:

� WBS (Work Breakdown Structure) Summary

WBS Level Category Cost % of Total

1 Project Management $306,300 20%
2 Hardware $76,000 5%
3 Software $614,000 40%
4 Testing $69,000 5%
5 Training and Support $202,400 13%
6 Reserves (20% of total est.) $253,540 17%

💰 Total Project Cost Estimate: $1,521,240

🛠� Key Line Items:

 Project Manager: 960 hrs × $100/hr = $96,000

 Team Members (Mgmt + Training): 3840 hrs × $75/hr = $288,000
 Contractors (10% of SW dev + testing): $66,300
 Hardware:
o 100 Handhelds × $600 = $60,000
o 4 Servers × $4,000 = $16,000
 Software Development: $594,000
 Testing: $69,000 (10% of software + hardware)
 Training:
o Trainee cost: $50,000
o Travel: $8,400
📌 Notes:

 Reserves are calculated as 20% of the total estimate.

 Contractors are estimated at 10% of the combined software development and
testing cost.
 This estimate is based on bottom-up estimation with detailed WBS categories.

Here is a simplified explanation of the Surveyor Pro Software Development Estimate:

� 1. Labor Estimate

Role Hours Cost/Hour Total Cost

Contractor Labor 3000 $150 $450,000
Project Team Members 1920 $75 $144,000
Total Labor Cost $594,000

📊 2. Function Point Estimate

Function points are used to estimate the size and complexity of a software system.

Component Qty Conv. Factor Function Points

External inputs 10 4 40
External interface files 3 7 21
External outputs 4 5 20
External queries 6 4 24
Logical internal tables 7 10 70
Total Function Points 175

�💻 Code-Based Estimate

 Java Language Equivalency Factor: 46 (lines of code per function point)

 SLOC (Source Lines of Code):
175 FP × 46 = 8,050 lines
 Productivity Model (COCOMO II):
Effort in months = 3.13 × (8.05)^1.072 = 29.28 months
 Total Labor Hours:
29.28 months × 160 hrs/month = 4,684.65 hours
 Cost/Labor Hour: $120
 Function Point Estimate Total:
4,684.65 × $120 = $562,158
✅ Key Takeaways

 Two different methods are used: labor-based and function point-based.

 Labor-based estimate: $594,000
 Function point-based estimate: $562,158
 These estimates help validate and cross-check the cost forecast.

Here is a simplified summary of the Cost Budgeting and Control concepts:

� Cost Budgeting

 Purpose: To allocate estimated project costs across specific work items over time.
 Tool Used: WBS (Work Breakdown Structure) — essential for identifying work
items.
 Main Output: Cost Baseline
o A time-phased budget used to monitor and manage cost performance.
o Helps determine when funds are needed (project funding requirements).

💵 Cost Control

 Goals:
o Monitor cost performance.
o Approve and manage changes to the cost baseline.
o Communicate cost-related changes to stakeholders.
 Common Challenges:
o Cost overruns and lack of control mechanisms.
 Helpful Tools:
o Performance review meetings – increase accountability.
o Performance measurement techniques – track budget vs. actual.

📈 Earned Value Management (EVM)

 A method that integrates scope, time, and cost to assess project performance.
 Requires a baseline (original plan + approved changes) and periodic updates.

Key EVM Terms:

Term Meaning
Planned Value (PV) Budgeted cost for work scheduled to be done.
Actual Cost (AC) Real cost spent to do the work.
Earned Value (EV) Budgeted cost for actual work completed.
⚖� Rate of Performance (RP)

 Measures how much actual work was done vs. how much should have been done.
 Formula:
RP = (Actual Work Completed %) / (Planned Work %)

Example:

 If task should be 100% done but is only 50% done:

RP = 50%, and
If budget was $10,000,
EV = $10,000 × 50% = $5,000

You've shared a comprehensive breakdown of cost estimation, cost control, and earned
value management (EVM) for IT project management. Here's a summary and key insights
from the images and text:

🔧 Cost Estimation Tools & Techniques

1. Analogous Estimates (Top-down):

o Based on past similar projects.
o Quick but less accurate if contexts differ.
2. Bottom-up Estimates (Activity-Based Costing):
o Estimates at task level and summed up.
o More accurate but time-consuming.
3. Parametric Modeling:
o Uses mathematical models with project parameters (e.g., $/line of code).
o Scalable and can be highly accurate with good data.

💸 Typical IT Estimation Problems

 Estimations made too early or without full scope.

 Inexperienced estimators or lack of reliable data.
 Optimism bias and pressure to underbid.
 Management clings to original estimates regardless of scope changes.

� Example: Surveyor Pro Cost Estimate

 Total estimated cost: $1,521,240

 Major categories:
o Software: $614,000 (40%)
 o Project Management: $306,300 (20%)
o Reserves (Contingency): $253,540 (17%)

💻 Software Development Estimate (Function Point Analysis)

 Total function points: 175

 Estimated Source Lines of Code (SLOC): 8,050
 Total labor hours: 4,684.65
 Total cost (at $120/hr): $562,158

📊 Earned Value Management (EVM) Concepts

Key terms and their formulas:

Term Formula
EV (Earned Value) EV = PV × RP
CV (Cost Variance) CV = EV – AC
SV (Schedule Variance) SV = EV – PV
CPI (Cost Performance Index) CPI = EV / AC
SPI (Schedule Performance Index) SPI = EV / PV
EAC (Estimate at Completion) EAC = BAC / CPI
Estimated Time to Complete Original Time / SPI
Week 1 Activity Sample:

 EV = $5,000
 PV = $10,000
 AC = $15,000
From this:
 CV = -$10,000 → Over budget
 SV = -$5,000 → Behind schedule
 CPI = 0.33 → Poor cost efficiency
 SPI = 0.50 → Only half of planned work completed

✅ Cost Budgeting & Control

 Cost budgeting uses the WBS and allocates costs over time to produce a cost
baseline.
 Cost control involves:
o Monitoring performance.
o Managing changes.
o Stakeholder communication.
o Using tools like EVM and performance reviews.
📐 Earned Value Management (EVM) Review
💡 Key Formulas & Interpretation

Term Formula Meaning

EV (Earned Value) EV = PV × RP Value of actual work completed
CV (Cost Variance) CV = EV – AC < 0 means over budget
SV (Schedule SV = EV – PV < 0 means behind schedule
Variance)
CPI (Cost Perf. Index) CPI = EV / AC < 1: Over budget, > 1: Under budget
SPI (Schedule Perf. SPI = EV / PV < 1: Behind schedule, > 1: Ahead of
Index) schedule
EAC (Est. at EAC = BAC / CPI Projected total cost if trends continue
Completion)
ETC (Time to ETC = Original Time Projected time required to finish
Complete) / SPI remaining work

📊 EVM Chart Interpretation Example

From a 5-month snapshot:

 BAC = $100,000
 CPI = 0.81761 → Over budget
 EAC = $122,308 → Project expected to exceed budget
 SPI = 0.94203 → Slightly behind schedule
 ETC = 12.74 months (vs. original 12 months) → Delay expected

📈 Insight from the chart:

 Actual Cost (AC) is always ≥ Earned Value (EV) → Overruns

 Planned Value (PV) was closely tracked until recently → Schedule slip occurred
recently

⚠� Limitations and Challenges with EVM

 Hard to estimate task completion percentages reliably.

 Tasks marked as "75% complete" don’t always imply only 25% effort remains.
 Suggested simplification: Use 0% (not started), 50% (in progress), and 100%
(complete).
 Better to track at WBS summary levels than at micro-task levels.
🗂� Project Portfolio Management (PPM)
� 5 Levels of Portfolio Management

1. Centralize Projects – one database

2. Prioritize Projects – based on goals and strategy
3. Categorize by Investment Type
4. Automate the Repository
5. Apply Risk-Return Analysis (Modern Portfolio Theory)

💼 Benefits of Portfolio Management

 Example: Schlumberger saved $3 million/year

 Found 14 projects doing the same thing
 META Group: Companies using value-based evaluation saw 25% better bottom-
line impact

💡 Best Practices & Challenges in IT Project Management

 22% of firms use a formal project plan effectively
 17% follow rigorous planning processes (schedule, cost, business impact)
 20% monitor portfolio progress and interdependencies
 Success depends on:
o Best practice processes
o Training
o Technology integration

� Successful companies take a holistic approach to IT project management.

� Software Tools for Cost Management

 Spreadsheets: Common for small teams and quick estimates.
 Financial applications: Handle complex cost structures.
 Project Management Software (like MS Project, Primavera):
o Budgeting
o Resource planning
o Linking with accounting systems
o Real-time cost tracking