PM Assignment 3

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University of Texas, Arlington *

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5373

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Industrial Engineering

Date

Apr 3, 2024

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Name: Shamika Awasarmol UTA ID: 1002115033 Project Management: INSY-5373-002 Assignment 3 CHAPTER 5 Review Questions: 1. Why are accurate estimates critical to effective project management? Without accurate time and cost estimates project control is ineffective. Inaccurate estimates can make the difference between profit and loss. • Estimations of time and cost play crucial roles in the process of project planning. • The accuracy of estimates is crucial for effective project control. • Accurate assessments are essential for making informed choices. • Estimations are employed to ascertain the duration and expenses of a project. • Estimations are employed in determining the requirements for cash flow. • Estimations are employed to create budgets that are phased over time and set the project's foundational reference point. • Lack of estimations leads to inaccuracies, ultimately causing both time and cost overruns or underruns. • Engaging in estimation activity minimizes mistakes. 2. Why is it difficult to estimate mega project (e.g., airport, stadium) costs and benefits? Initially, the 2–5-year timeframe for accomplishing substantial, intricate projects poses challenges in precisely predicting expenses and user requirements. Furthermore, the intricate nature of such undertakings complicates the accurate assessment of all associated costs. Lastly, the level of risk involved is considerable; when complications arise, they tend to do so on a substantial scale. Despite these circumstances indicating a need for a cautious estimate, the opposite often happens. Either unbridled enthusiasm or deliberate manipulation is employed to advocate for an inflated outlook on the project

Discussion Questions: Portland Aerial Tram 1. Can you think of a local public project that had significant cost overruns like the Portland Tram project? While there have been many significant projects that have gone wrong owing to cost overruns across the world, I believe the ODOT (Oregon Department of Transportation) in Oregon is a good example. While the project's original budget was $450 million, the current estimate is between $715 million and $795 million, and perhaps more concerning is the fact that the higher estimate may go up to or beyond $1 billion if major revisions to the project desired by local officials are considered. 2. Do you agree with the statement that “nothing great would ever be built if people knew in advance what the real costs and challenges were”? I concur with the assertion that if individuals were fully aware of the true costs and challenges in advance, many groundbreaking projects might never come to fruition. It is only natural for people to be hesitant about undertaking high-risk endeavours. Given that virtually all projects, especially large-scale ones, inevitably encounter cost and other significant challenges, it is likely that people would shy away from such initiatives, resulting in a lack of progress. Initiating high-risk projects despite the uncertainties is beneficial because it catalyzes project commencement. The essence of projects lies in their initiation, and through this process, we gain valuable insights on how to effectively manage and complete them. This contrasts with the scenario where projects are never initiated due to fears of potential cost over runs. 5.3 Estimate Accuracy 1. Why is the range so much higher for IT projects than construction projects? The range of cost variation tends to be considerably greater for IT projects compared to other construction endeavours. This is primarily attributed to the dynamic nature of client requirements in IT projects, which can lead to scope creep and budget adjustments. In cases where project scopes evolve, the budgets are subject to more frequent changes, and the potential for both overestimation and underestimation is relatively higher. This phenomenon is less common in other types of construction projects.

Exercises: 1. Calculate the direct cost of labor for a project team member using the following data: Hourly rate: $50/hr Hours needed: 120 Overhead rate: 40% To calculate the direct cost of labor for a project team member: Gross Labor Cost: Hourly Rate: $50/hr Hours Needed: 120 Gross Labor Cost = $50/hr x 120 hours = $6,000 Overhead Cost: Overhead Rate: 40% Overhead Cost = $6,000 x 0.40 = $2,400 Total Direct Cost of Labor: Total Direct Cost of Labor = Gross Labor Cost + Overhead Cost Total Direct Cost of Labor = $6,000 + $2,400 = $8,400 The total direct cost for this project team member is $8,400. 2. Exercise Figure 5.1 is a project WBS with cost apportioned by percentages. If the total project cost is estimated to be $800,000, what are the estimated costs for the following deliverables? a. Design b. Programming c. In-house testing What weaknesses are inherent in this estimating approach? a. Design - 40% of $800,000 = $800,000 x 0.40 = $320,000 So, 40% of $800,000 is $320,000. b. Programming - 22% of $320,000 = $320,000 x 0.22 = $70,400 So, 22% of $320,000 is $70,400. c. In-house testing - 40% of $400,000 = $400,000 x 0.40 = $160,000 So, 40% of $400,000 is $160,000. Weakness: We need total estimate cost. If this entity is unknown, we cannot work on other costs. We need realistic historic data for this approach to work. It offers percentages for the primary stages, but it lacks a detailed breakdown of expenses within each phase. This can complicate the identification of specific cost factors or potential areas for efficiency improvement.

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3.Assume you are the project manager for the Tidal 2 software project. You have been asked to calculate the expected cost for the project. Your company’s database indicates that developers can handle eight function points each person- month and that the cost per developer at your firm is $5,000 per month. You and your team of five developers have come up with the following requirements: According to the company's data, each developer has a capacity of handling eight function points per person-month, with a monthly cost of $5,000 per developer. Development team consists of five members, and together, you've identified the following project requirements: Inputs: 10 with low complexity Outputs: 4 with low complexity Inquiries: 4 with high complexity Files: 28 with medium complexity Interfaces: 18 with high complexity Elements Count Low Medium High Total Inputs 10 *3 30 Outputs 4 *4 16 Inquiries 4 *6 24 Files 28 *7 196 Interfaces 18 *7 126 Total 392 Total Function Points (FP) = 30 + 16 + 24 + 196 + 126 = 392 function points With your team of five developers, the total person-months (PM) required can be calculated as follows: Total PM = Total Function Points / (Function Points per Developer per Month * Number of Developers) Total PM = 392 FP / (8 FP/developer/month * 5 developers) = 9.75 months The estimated cost can then be determined: Estimated Cost = Total PM * Cost per Developer per Month * Number of Developers Estimated Cost = 9.75 * $5,000 * 5 = $243,750 Finally, the estimated project duration is 9.75 months.

PM Assignment 3

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