Costing Lecture Time and cost are similar. Why need to manage cost? · Assumption: People are cost-sensitive. Buy a house and car, we would care about the cost - we use the best negotiation skills to bring down the cost. Clients will to squeeze much value from a project. (every rich clients) o Management watches the cost of a project very closely. Cost Management (pmbok) · Estimates are approximations. You can't guarantee the cost. · Estimates - when projects proposing project. Budget - agreed or approved costs by the client. Estimates becomes the Budget. Project Cost Management · Costing is done in different ways. Economic modelling. · PM does the estimates, and then company's finance dept. does the modelling such as NPV, lifecycle costing (whole asset life - dev. + support) , profit margin · Bidding a new project (building or it). You can bid on different ways - lowest cost. Basis of estimates (how you do your estimates). o Flooring that lasts 4 years (25% expensive) vs 2 years · Assignment: Basis for estimates. Contingency - factor in risk and up/downs. Reserve Amount/Percentage - 2ff% (too small - PM gets blame and client doesn't care. Too bit - client will jump on PM) · Contingency determined based on risk-assessment - requires judgement on location, political environment, contractors (not reliable), technology, etc (whole bunch of things) · Need to explain basis for contingency (reasoning/justification behind) to client Project with clients - relationship - trust, integrity and call it as it (PM is the expert, not the client . PM takes control of the project)