Long ago I had a Blog conversation with an expert in MSFT Project Server about cost management in projects. His position was managing the details of cost with a resource loaded schedule was a waste of time. I was embedded TOO much in the IT world to remember my construction and defense roots. Now that I've come back to A&D for the past 3 years, I remember that conversation fondly as laughable.
I'm editing an appendix to the PMI Earned Value Management Practice Guide, and here's a clip from a paper that defines all we need to know about projects and project cost. From "Combination of Project Cost Forecasts in Earned Value Management," Journal of Construction Engineering and Management.
Reliable cost estimates are essential for effective project control and the management of cash flows within the project and at the company level. Conventional approaches to project cost forecasting, which rely on detailed information developed for a specific project (the bottom-up estimate or inside view), often result in cost overruns. It is argued here that the inside view project cost estimates should be adjusted by combining them with the outside (or top-down) view of the project, which is based on statistical models of historical project data. This paper presents a probabilistic cost forecasting method and a framework for an adaptive combination of the inside view and the outside view forecasts of project cost using Bayesian inference and the Bayesian model averaging technique. During the project execution phase, the Bayesian adaptive forecasting method incorporates into the predictions the actual performance data from earned value management and revises pre-project cost estimates, making full use of the available information. Qualitative examples are presented to demonstrate the validity of the proposed method as a tool for effective project cost prediction and control.
If you're on a IT project, someone, somewhere is interested in cost management. If you're working a government contract we know who that is - finance. If it's construction we also know who that is - finance and the customer.
There is no such thing as doing project work and NOT managing cost. The notion - wrongly - that Agile projects are not managed in the traditional sense of cost and schedule only occurs when there is no one who cares about cost and schedule.
The key to success of any project contains Five Immutable Principles:
- Where are we going?
- How do we get there?
- Do we have enough time, resources, and money to get there?
- What impediments will we encounter along the way?
- How do we know we are making progress?
All these questions have a component of money.
