Question

Question 1

A) Why are accurate cost estimates critical to effective project management? how would you go about estimating cost for a typical project?

B) What are the elements of a comprehensive reporting system to help in the ongoing management and control of a project?

C) A number of projects are put forward from different departments in your organization. what would your approach be,as a senior manager,in determining priorities for selecting and prioritizing projects?

Answer 1

Answer A)

A cost estimate refers to forecasting the approximate value of a project. Project management refers to managing all the operations of the project in order to achieve specific project objectives. Accurate cost estimates are critical to effective project management because of the following reasons –

· Accurate cost estimate helps in planning the operations. It helps the management team to plan about the resources to be used in project.

· Accurate cost estimates are used to develop cash flow needs, project baseline and the budgets.

· Accurate cost estimate reduces the number of errors and chance of losses for company.

· It is necessary for project control as management team can plan their activities to cover up any deviations if estimates are correct.

· It helps the management to be on track by avoiding cost under/overruns.

I would go for estimating cost for a typical project by following the below mentioned steps –

1. Determine Estimate Basis – The first step is to determine the basis on which estimates would be made. It could be made by considering, past data, past budgets, financial results, market contingencies, competitor’s policies, market forces, availability of resources, scope of the project, timelines, etc.

2. Prepare the estimates – Once the required data is collected then estimates are prepared. Costs are estimated for all the components of project and for the project as whole. It is necessary to estimate cost for each activity as it provides more accuracy and it is easy to discover any deviations to keep the process in control at every stage.

3. Reviewing – The next step is to review the estimates made by a different panel. They should compare the estimates made with the goals and requirement of project and check if the estimates are attainable and in consistency with the requirement of project.

4. Contingency plans – This process must include the prospective risks and set up a contingency plan to cope with such risks.

5. Communication – Once the estimation process is completed it must be communicated to all the concerned people in the project. Project managers needs to go through the process completely to run and manage the project smoothly.

6. Control – This involves checking the reviews once project is started. If any estimate is needed to revise, then it should be done and must be incorporated into project cost baselines.

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