Cost (week 4)

Question 1

What is a budget?

Answer 1

Estimate of income and expenditure for a set period of time

Question 2

What are resources?

Answer 2

People, equipment, materials or services required for an activity

Question 3

What is earned value management?

Answer 3

Technique for measuring project performance & progress,
Combines measurement of scope, schedule & cost,
Involves PV and EV

Question 4

What are fixed costs? Give examples.

Answer 4

Costs that don’t change with the time line of project

E.g. head office bills, wages/salaries for permanent staff, finance, leasing costs

Question 5

What are indirect costs? Give examples.

Answer 5

Costs that are spread against many projects, can’t be linked to one project
E.g. project manager, project accountant

Question 6

What are variable costs? Give examples.

Answer 6

Costs that change during life cycle of project

E.g. labour, plant, materials, sub-contractors, site management

Question 7

What are direct costs? Give examples.

Answer 7

Costs that are directly attributable to project

E.g. concrete, concreter, concrete pump

Question 8

What are the steps of Cost Management?

Answer 8

1. Plan cost management
2. Estimate costs
3. Determine budget
4. Control costs

Question 9

What is ROM?

Answer 9

Rough Order of Magnitude (preliminary estimate): used in preliminary planning, assists go/no go decisions, low level of accuracy

Question 10

What is Detailed Cost Estimate?

Answer 10

Increased accuracy, used to define tasks & schedules, based on systems and methods of measurement

Question 11

Describe Preliminary Estimate (ROM). What is the margin of error?

Answer 11

• 20-25% margin of error
• early planning stages
• systems based WBS
• feasibility focus
• large contingency
• low confidence

Question 12

Describe Intermediate Estimate. What is the margin of error?

Answer 12

• 10-15% margin of error
• schematic design & development stage
• focus on systems, alternatives & comparisons
• begin migration from systems to resources
• frequently updated
• gradual reduction of contingency

Question 13

Describe Final Estimate. What is the margin of error?

Answer 13

• 2-3% margin of error
• for bidding, construction and control
• multiple bidders, comparisons of major tasks & systems
• very detailed take-offs and specifications
• contingency reduced
• post-contract data can be used for future projects

Question 14

What is PV and what is it used for?

Answer 14

PV: planned value

Used for Budget Cost of Work Schedule (BCWS)

Question 15

What is EV and what is it used for?

Answer 15

EV: earned value

Used for Budgeted Cost of Work Performed (BCWP)

Question 16

What are BCWS and BCWP?

Answer 16

BCWS: budgeted cost of work scheduled
BCWP: budgeted cost of work performed