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Cost and Value Management in Projects

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Cost and Value Management in Projects

Project manager's guide to achieving cost efficiency and value optimization―thoroughly updated with new cases, examples, and problem sets

The newly revised and updated Second Edition of Cost and Value Management in Projects provides project managers with a thorough understanding of the various dimensions of cost and value in projects, along with the factors that impact them and the managerial approaches for achieving cost efficiency and value optimization. Whereas most cost management books discuss the topic from a tactical perspective, such as through the use of simple budgeting or Earned Value Analysis, this Second Edition addresses cost from a strategic perspective, examining project management decision areas that have the potential to enhance value and providing an integrated framework for managing cost.

The Second Edition includes updates to key topic areas such as project benefits realization, updated end-of-chapter exercises such as discussion questions and problem sets, updated case studies, and new spreadsheet analytic techniques and examples.

Written by two highly qualified authors with significant experience in the field, Cost and Value Management in Projects includes information on:

  • Value management through value planning, engineering, and analysis from the perspective of projects, and best practices on how to avoid common pitfalls in managing cost and value
  • Organization strategy and project selection, organization structure and culture, project definition (and contracts), and estimating project times and cost
  • Developing project plans and schedules, managing risk, scheduling resources and cost, reducing project duration, leadership, performance measurement, and project closure
  • Attainment of value in complex environmental settings and benefits of effective project management

Cost and Value Management in Projects is an essential resource on the subject for stakeholders at all corporate and government levels, including executives measuring performance, middle level corporate managers, project and team managers, engineers, project team members, and business consultants, along with students in related programs of study.

Author(s): Ray R. Venkataraman, Jeffrey K. Pinto
Edition: 2
Publisher: Wiley
Year: 2023

Language: English
Pages: 398
City: Hoboken

Cover
Cost and Value Management in Projects
Copyright
Contents
About the Authors
Introduction to the Second Edition
Chapter 1 Introduction to the Challenge of Cost and Value Management in Projects
1.1 Importance of Cost and Value Management in Projects
1.2 Keys to Effective Project Cost Management
1.3 Essential Features of Project Value Management
1.4 Organization of the Book
Chapter Summary
References
Chapter 2 Project Needs Assessment, Concept Development, and Planning
2.1 Needs Identification
2.2 Conceptual Development
2.3 Project Feasibility
2.3.1 Five Areas of Project Feasibility
2.3.2 Benefits of Conducting a Project Feasibility Study
2.4 The Statement of Work
2.5 Project Planning
2.6 Project Scope Definition
2.6.1 Purpose of the Scope Definition Document
2.6.2 Elements of the Scope Definition Document
2.6.3 Project Scope Changes
2.7 Work Breakdown Structure
2.7.1 Types of Work Breakdown Structures
2.7.2 Work Breakdown Structure Development
2.7.3 Coding of Work Breakdown Structures
2.7.4 Integrating the WBS and the Organization
2.7.5 Guidelines for Developing a Work Breakdown Structure
Chapter Summary
Discussion and Review Questions
References
Chapter 3 Cost Estimation
3.1 Importance of Cost Estimation
3.2 Problems of Cost Estimation
3.3 Sources and Categories of Project Costs
3.4 Cost Estimating Methods
3.5 Cost Estimation Process
3.5.1 Creating the Detailed Estimate
3.6 Allowances for Contingencies in Cost Estimation
3.7 The Use of Learning Curves in Cost Estimation
Chapter Summary
Discussion and Review Questions
References
Chapter 3a Appendix to Chapter 3: Forecasting Methods for Cost and Value Management
3A.1 Categories of Forecasting in Project Management
3A.2 Forecasting Methods for Projects
3A.3 Time Series Analysis
3A.4 Linear Regression Analysis
3A.4.1 Evaluating the “Fit” of the Regression Line
3A.4.2 Limitations in Forecasting Using Linear Regression
3A.4 Forecasting the Project End Conditions
3A.5 S-Curve Forecasting
3A.6 Technological Forecasting
Chapter Summary
Discussion and Review Questions
References
Chapter 4 Project Budgeting
4.1 Issues in Project Budgeting
4.2 Developing a Project Budget
4.2.1 Work Breakdown Structure (WBS)
4.2.2 Issues in Creating a Project Budget
4.3 Approaches to Developing a Project Budget
4.3.1 Top-down Budgeting
4.3.2 Bottom-up Budgeting
4.3.3 Preparing the Project Budget
4.4 Activity-based Costing
4.4.1 Steps in Activity-based Costing
4.4.2 Cost Drivers in Activity-based Costing
4.4.3 Sample Project Budget 1
4.4.4 Sample Project Budget 2
4.5 Program Budgeting
4.5.1 Time-phased Budgets
4.5.2 Tracking Chart
4.6 Developing a Project Contingency Budget
4.6.1 Allocation of Contingency Funds
4.6.2 Drawbacks of Contingency Funding
4.6.3 Advantages of Contingency Funding
4.7 Issues in Budget Development
4.8 Crashing the Project: Budget Effects
4.8.1 Crashing Project Activities—Decision Making
Chapter Summary
Discussion and Review Questions
References
Chapter 5 Project Cost Control
5.1 Overview of the Project Evaluation and Control System
5.1.1 Project Control Process
5.2 Integrating Cost and Time in Monitoring Project Performance: The S-Curve
5.3 Earned Value Management
5.4 Earned Value Management Model
5.5 Fundamentals of Earned Value
5.6 EVM Terminology
5.7 Relevancy of Earned Value Management
5.8 Conducting an Earned Value Analysis
5.9 Performing an Earned Value Assessment
5.10 Managing a Portfolio of Projects with Earned Value Management
5.11 Important Issues in the Effective Use of Earned Value Management
5.12 Benefits of EVM
5.13 EVM Using Microsoft Project
5.13.1 Step 1. Enter Resources in the Resource Sheet View
5.13.2 Step 2. Assign Resources to Tasks
5.13.3 Step 3. Save the Project Baseline
5.13.4 Step 4. Record Project Actuals
5.13.5 Step 5. Review the EVA View and Reports
5.13.6 Step 6. Calculate Schedule Performance and Cost Performance indices
5.13.7 Summary: Earned Value Management in Six Easy Steps
Chapter Summary
Discussion and Review Questions
References
Chapter 6 Cash Flow Management
6.1 The Concept of Cash Flow
6.2 Cash Flow and the Worth of Projects
6.2.1 The Time Value of Money, and Techniques for Determining It
6.2.2 Applying Discounting to Project Cash Flow
6.3 Payment Arrangements
6.3.1 Cost-Reimbursable Arrangements
6.3.2 Payment Plans
6.3.3 Claims and Variations
6.3.4 Cost Variation Due to Inflation and Exchange Rate Fluctuation
6.3.5 Price Incentives
6.3.6 Retentions
Chapter Summary
Discussion and Review Questions
References
Chapter 7 Financial Management in Projects
7.1 Project Financial Management
7.2 Project Accounting
7.3 Financing of Projects Versus Project Finance
7.4 Principles of Financing Projects
7.5 Types and Sources of Finance
7.6 Sources of Finance
7.7 Cost of Financing
7.8 Project Finance
7.9 The Process of Project Financial Management
7.9.1 Conducting Feasibility Studies
7.9.2 Planning the Project Finance
7.9.3 Arranging the Financial Package
7.9.4 Controlling the Financial Package
7.9.5 Controlling Financial Risk
7.9.6 Options Models
Chapter Summary
Discussion and Review Questions
References
Chapter 8 Value Management
8.1 Concept of Value
8.2 Dimensions and Measures of Value
8.3 Overview of Value Management
8.3.1 Definition
8.3.2 Scope
8.3.3 Key Principles of VM
8.3.4 Key Attributes of VM
8.4 Value Management Terms
8.5 Need for Value Management in Projects
8.6 The Value Management Approach
8.6.1 Cross-functional Framework
8.6.2 Use of Functions
8.6.3 Structured Decision Process
8.7 The VM Process
8.8 Benefits of Value Management
8.9 Other VM Requirements
8.10 Value Management Reviews
8.11 Relationship Between Project Value and Risk
8.12 Value Management as an Aid to Risk Assessment
8.13 An Example of How VM and Risk Management Interrelate
8.14 Project Benefits Management
Chapter Summary
Discussion and Review Questions
References
Chapter 9 Change Control and Configuration Management
9.1 Causes of Changes
9.2 Influence of Changes
9.3 Configuration Management
9.4 Configuration Management Standards
9.5 The CM Process
9.6 Role and Benefits of Configuration Management in Projects
9.7 Control of Changes
9.8 Change Control Procedure and Configuration Control
9.9 Responsibility for the Control of Changes
9.10 Crisis Management
9.11 An Example of Configuration Management
Chapter Summary
Discussion and Review Questions
References
Chapter 10 Supply Chain Management
10.1 What Is Supply Chain Management?
10.2 The Need to Manage Supply Chains
10.3 SCM Benefits
10.4 Critical Areas of SCM
10.4.1 Customers
10.4.2 Suppliers
10.4.3 Design and Operations
10.4.4 Logistics
10.4.5 Inventory
10.5 SCM Issues in Project Management
10.6 Value Drivers in Project Supply Chain Management
10.7 Optimizing Value in Project Supply Chains
10.7.1 Total Quality Management
10.7.2 Choosing the Right Supply Chain
10.8 Project Supply Chain Process Framework
10.8.1 Procurement
10.8.2 Conversion
10.8.3 Delivery
10.9 Integrating the Supply Chain
10.10 Performance Metrics in Project Supply Chain Management
10.11 Project Supply Chain Metrics and the Supply Chain Operations Reference (SCOR) Model
10.12 Future Issues in Project Supply Chain Management
Chapter Summary
Discussion and Review Questions
References
Chapter 11 Quality Management in Projects
11.1 Definition of Quality in Projects
11.2 Elements of Project Quality
11.2.1 The Project’s Product
11.2.2 Management Processes
11.2.3 Quality Planning
11.2.4 Quality Assurance (QA)
11.2.5 Quality Control
11.2.6 Corporate Culture
11.3 Total Quality Management in Projects
11.4 Root Cause Analysis
11.5 Quality Management System
11.6 Quality Management Methods for a Project Organization
11.6.1 The Six Sigma Methodology
11.6.2 The Six Sigma Model for Projects
11.6.3 Application of Six Sigma in Software Project Management
11.7 Quality Standards for Projects
Chapter Summary
Discussion and Review Questions
References
Chapter 12 Integrating Cost and Value in Projects
12.1 The Project Value Chain
12.2 Project Value Chain Analysis
12.3 Sources and Strategies for Integrating Cost and Value in Projects
12.3.1 The Project’s Inbound Supply Chain
12.3.2 Project Design
12.3.3 Project Development
12.3.4 Project Delivery/Implementation
12.3.5 Costs of the Project Life Cycle Employing the LCC Model
12.4 Integrated Value and Risk Management
12.5 The Project Cost and Value Integration Process
Chapter Summary
Discussion and Review Questions
References
Index
EULA