Cost Control Engineer

DCMA

DCMA 14 check-points guarantee many benefits for the project schedule. Some of

those are the following:

- Provide the possibility for a constant in-depth analysis of the schedule;

- Help to identify weak points in the schedule;

- Assist in designating potential problems around the project activities and in

creating appropriate corrective plans;

- Assure that the project is managed and executed with success and on time.

The metrics that need to be followed and examined are the following:

ü Logic

ü Leads

ü Lags

ü Relationship Types

ü Hard Constraints

ü High Float

ü Negative Float

ü High Duration

ü Invalid Dates

ü Resources

ü Missed Tasks

ü Critical Path Test

ü Critical Path Length Index (CPLI)

ü Baseline Execution Index (BEI)

Logic

The metric ‘Logic’ provides the possibility for measurement of the ‘%’ of incomplete

tasks with no predecessors and/or successors, also called ‘dangling’ activities

Lead s

‘Leads’ is the control criteria that helps measure the ‘%’ of tasks that have a

negative lag between each other

Lags

The metric ‘Lags’ is the opposite of ‘Leads’. Specifically, it allows an evaluation of

the ‘%’ of project activities that have a positive lag between each other

Relationship Types

It is recommended that the 90% of the project schedule activities are of a finish-to-

start type (FS). The finish-to-start type of relationship stands for ‘Activity A must be

completed before activity B can begin’. This type of relationship between particular

tasks is the foundation of the Waterfall method used in project management.

Finish-to-start relationship provides the most explicit presentation of the project

schedule activities. The other types of relationships, which can be identified in a

schedule, are finish-to-finish (FF), start-to-start (SS), and start-to-finish (SF).

However, it is not recommendable for these to be used since they are harder to

monitor and control.

Hard Constraints

Under ‘Constraints’ in a project schedule are identified Hard Constraints

(Mandatory Start and Mandatory Finish) and Soft Constraints (As Late As Possible,

Start On, Start On or Before, Start On or After, Finish On, Finish On or Before and

Finish On or After).

High Float

This metric measures the ‘%’ of unfinished tasks with total float greater than 44

working days. DCMA requires that the High Float activity doesn’t exceed 44 working

days, i.e. the percentage of total incomplete tasks doesn’t exceed 5%.

Negative Float

This metric is interconnected with Hard Constraints since it can indicate that Hard

Constraints have been assigned to the schedule. When this happens, it is very much

feasible that the project's or milestones' completion is delayed.

High Duration

This metric provides the possibility to monitor and control the duration of tasks and

it requires that no task should last longer than 44 working days. If it is detected that

the percentage of incomplete tasks with duration beyond 44 days is above 5% it is

preferable to examine if it is achievable to decompose them in distinct tasks.

Invalid Dates

The metric for Invalid Dates analyses both forecast and actual dates of project

activities. An activity is considered to have invalid dates if it has forecast start/finish

dates in the past or actual start/finish dates in the future. More specifically, this

metric refers to tasks with actual start/finish date after project status date and with

start/finish date before project status date without an actual start/finish.

Resources

The metric for ‘Resources’ is the most open-ended on the list. DCMA recommends

that all project schedules are resource-loaded, but additionally, it allows some

schedules to not include resources at all.

Missed Tasks

The metric for ‘Missed Tasks’ can cause or prevent the project to fall far behind. It

assists in measuring the schedule performance in parallel to the baseline plan.

Particularly, the number of missing tasks can indicate how well or badly the project

schedule meets the baseline schedule.

Critical Path Test

This test focusses on assessing the integrity of the schedule’s network logic. Firstly

it is identified as a critical activity and its remaining duration. The next step is

intentionally extending the duration of this activity for 600 days. The last step is

recalculating the schedule dates and identifying if the date for completion of the

project is extended for the same number of days applied to the critical activity.

Critical Path Length Index (CPLI)

The Critical Path Length Index (CPLI) presents the measure of the efficiency

necessary for completing a milestone on assigned time. CPLI evaluates the integrity

of the overall network logic and measures the ‘realism’ of completing a project

successfully.

Baseline Execution Index (BEI)

The Baseline Execution Index (BEI) test is a metric for evaluating schedule

performance in parallel with the baseline plan but it focuses on the project’s team

productivity in the process of executing activities.

Budget Types

Sales budget – an estimate of future sales, often broken down into both units and currency. It is used to create company sales goals.

Production budget - an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material.

Capital budget – used to determine whether an organızatıon’s long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.

Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short – term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company wil need to seek outside financing.

•Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.

Project budget – a prediction of the costs associated with a particular company project.

These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used

to establish a project budget.

Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government

levies.

Expenditure budget – includes spending data items.

Method of Cost Estimation

In the process of cost estimation, the Project Cost Engineer uses either one or the combination of the following tools and technique

Methods of Cost Estimation in Projects

Expert Judgement
Analogous Estimating
Parametric Estimating
Bottom-up Estimating
Three-point Estimating
Data Analysis (Alternative analysis/Reserve analysis)
Project Management Information system
Decision making (voting)

) Expert Judgement Method

Expertise should be considered from individuals or groups with specialized knowledge or training in team and physical resource planning and estimating.

Expert judgment, guided by historical information, provides valuable insight about the environment and information from prior similar projects.

Expert judgment can also be used to determine whether to combine different methods of estimation and how to reconcile differences between them.

2) Analogous Estimating Method

Analogous cost estimating uses the values such as scope, cost, budget, and duration or measures of scale such as size, weight, and complexity from a previous, similar project as the basis for estimating the same parameter or measurement for a current project.

When estimating costs, this technique relies on the actual cost of previous, similar projects as the basis for estimating the cost of the current project.

It is most reliable when the previous projects are similar in fact and not just in appearance, and the project team members preparing the estimates have the needed expertise.

3) Parametric Estimating Method

Parametric estimating uses an algorithm or a statistical relationship between historical data and other variables (e.g., square footage in construction) to calculate resource quantities needed for an activity, based on historical data and project parameters.

For example, if an activity needs 4,000 hours of coding and it needs to finish it in 1 year, it will require two people to code (each doing 2,000 hours a year). This technique can produce higher levels of accuracy depending on the sophistication and underlying data built into the model.

4) Bottom-up Estimating Method

In the Bottom-up estimating method, team and physical resources are estimated at the activity level and then aggregated to develop the estimates for work packages, control accounts, and summary project levels.

Bottom-up estimating is a method of estimating a component of work. The cost of individual work packages or activities is estimated to the greatest level of specified detail. The detailed cost is then summarized or rolled up to higher levels for subsequent reporting and tracking purposes.

The cost and accuracy of bottom-up cost estimating are typically influenced by the size and complexity of the individual activity or work package.

5) Three-Point Estimating Method

The accuracy of single-point activity cost estimates may be improved by considering estimation uncertainty and risk and using three estimates to define an approximate range for an activity‘s cost:

• Most likely (M): The cost of the activity, based on realistic effort assessment for the required work and any predicted expenses.
• Optimistic (O): The activity cost based on analysis of the best-case scenario for the activity.
• Pessimistic (P): The activity cost based on analysis of the worst-case scenario for the activity.

Depending on the assumed distribution of values within the range of the three estimates the expected cost, cE, can be calculated using a formula. Two commonly used formulas are triangular and beta distributions. The formulas are:

Triangular Distribution
E = (O+M+P)/3
Beta Distribution (from a traditional PERT analysis)
E = (O+4M+P)/6

Cost estimates based on three points with an assumed distribution provide an expected cost and clarify the range of uncertainty around the expected cost.

6) Data Analysis Method

A data analysis technique used in this process includes but is not limited to alternatives analysis. Alternatives analysis is used to evaluate identified options in order to select the options or approaches to use to execute and perform the work of the project. Alternatives analysis assists in providing the best solution to perform the project activities, within the defined constraints.

Instead of overestimating each cost, money is budgeted for dealing with unplanned but statistically predictable cost increases. Funds allocated for this purpose are called contingency reserves.

7) Project Management Information System Method

Project management information systems can include resource management software that can help plan, organize, and manage resource pools and develop resource estimates.

Depending on the sophistication of the software, resource breakdown structures, resource availability, resource rates, and various resource calendars can be designed to assist in optimizing resource utilization.

8) Decision-Making Method

Some decision techniques are unanimity, majority, plurality, points allocation, and dictatorship. For unanimity, everyone must agree; there is a shared consensus. A majority or plurality is usually determined by a vote. For a majority, the decision must be agreed to by more than half the participants.

Basic of Cost Management

Project Cost Management includes the processes involved in planning, estimating, budgeting, financing, funding, managing and controlling costs so that the project can be completed within the approved budget.

Major process group for cost management

Plan Cost Management
Estimate costs
Determine Budget
Control Costs

1. Plan Cost Management

Plan Cost Management is the process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.

The Cost Management Plan describes how costs will be estimated, structured, and controlled. It can include cost information such as units of measure, precision and accuracy levels, variance control thresholds, and performance measurement criteria.

2. Estimate Costs

Estimate Costs is the process of developing an approximation of the monetary resources needed to complete project work.

Some of the techniques used for estimating costs are:

• Analogous Estimating involves comparing the actual cost of previous, similar projects to estimate the cost of the current project.
• Parametric Estimating involves using a statistical relationship between historical data and other variables to calculate activity cost estimates.
• Bottom-up Estimating involves estimating the cost of work packages or individual schedule activities using the lowest level of decomposed work. Detailed cost estimates are then aggregated or “rolled up” to higher levels for reporting and tracking purposes.
• Three-Point Estimating can be used to improve the accuracy of activity cost estimates by using three values (Pessimistic, Optimistic, and Most Likely), instead of one to account for estimating uncertainty. A common way to calculate a Three-Point Estimate is to use the PERT formula, which weights the Mostly Likely value four times more than the other two.

Data Analysis techniques used when determining and refining Cost Estimates are:

• Reserve Analysis is used to establish cost reserves for the project. In this process, Contingency Reserves are considered.
• Contingency Reserves are additional costs added to activity cost estimates due to identified risks associated with those activities
• Cost of Quality involves making assumptions about the costs associated with the quality management activities of the project (i.e., prevention, appraisal, and failure costs).

Types of Estimates:

• Rough Order of Magnitude (ROM) estimates vary from -25% to +75% as compared to the actual cost. This type of estimate is often prepared pre-project or during project initiation.
• Budget estimates range from -10% to +25% and are typically created in the planning phase.
• Definitive estimates range from -5% to +10% and are created during project execution when more detailed is known about the project.

3. Determine Budget

Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

The activity Cost Estimates are aggregated to Work Package or control account levels, and then eventually for the entire project so that a Cost Baseline can be created. The technique used to do this is referred to as Cost Aggregation.

Reserve Analysis is used in this process to determine the Management Reserves for the project.

Management Reserves are meant to address unforeseen work or risks

The Cost Baseline is the approved version of the time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis for comparison to actual results.

When using Earned Value Management (EVM), the Cost Baseline is referred to as the Performance Measurement Baseline (PMB), which is an approved integrated scope-schedule- cost plan for the project work against which project execution is compared to measure and manage performance.

Update Progress with Primavera P6

In the Primavera P6, progress updates are based on the below points as per the project requirements:

Review all activity types and their usage.
Update Method and its setting
How to design a creative output from your software
What is a Schedule Health check after Update?
What is the Tracking Layout and its Functionality?
How to compare two schedules by Schedule Comparison