Connie_Fu

CA Clarity Tuesday Tip - An Iterative Approach to Creating Project Cost Pla

Discussion created by Connie_Fu on Jan 1, 2014
Latest reply on Dec 3, 2014 by navzjoshi00

Happy New Year! This week's tip came from Mike Hoefgen, Senior Principal Consultant from CA Technologies

You have a great idea for an application development project so you bring it up to your boss, he thinks your idea has merit and he wants you to document your idea. One of the many questions that need to be answered by your document is: “How much will this project cost?”

What follows is an example of how an iterative approach can be applied to creating a project cost plan where you start with a high level estimate and continue to refine that estimate with each iteration. Some organizations may require a couple iterations other organizations will have many more. This example can be expanded or contracted as needed.

First Iteration

Your first estimate can be very high level and doesn’t require any details, no sense spending too much time on an estimate until it gets further along in the approval process. You pick a cost of $400,000. You know the finance team needs to know the capital vs. operating cost. So, you divide that up: $300,000 as capital cost and $100,000 as operating cost.

Your project idea has been reviewed and gets a “thumbs up” and you must now provide more details behind your initial cost estimate.

financial_plan_summary

 Second Iteration

The next step of creating a more detailed cost plan would be to decide what kind of people/roles you will need to complete this project. Maybe you need an architect to design the foundational architecture, a business analyst to document the requirements, a developer to write code, a project manager and others. The finance department requires that you also estimate the capital versus operating costs so you decide on a capitalization percentage for each of the roles. At this point it’s still an estimate but that’s part of the iterative process.

second_iteration

Using the project duration, roles, capitalization percentage and a rate matrix you can create a high-level cost plan.

second_iteration_1 

Third Iteration

You realize the architect is only needed for the first few weeks. Conversely, you don’t need a developer until after the architecture has been then defined. So, you go back to your list of roles and revise them to be a bit more accurate by updating the monthly hours for each role.

third_iteration

Now that you made a few revisions you can create another cost plan that utilizes the updated allocations by role. You could continue to refine this even more by adjusting hours and creating another cost plan iteration, but it might be easier to move onto the next step (iteration).

Fourth Iteration

One of the responsibilities of a project manager is to create a list of tasks in a work breakdown structure.

fourth_iteration

Additionally, each task will have one or more roles assigned to it. Using a rate matrix, the assigned roles and the start/finish dates of the tasks a more detailed project cost plan can be calculated. If each phase (or task) of the project has been tagged as either capital/operating your newest iteration of the cost plan will break out the capital/operating dollars thus keeping finance happy.

fourth_iteration_1

As you can see creating a cost plan using an iterative approach is straight forward and easy and using a software solution to help with calculations of these iterative plans is a huge time saver. All of the above screenshots were taken from CA Clarity PPM which allows the project manager to focus on the managing the project rather than managing spreadsheets. When using CA Clarity PPM the project manager put in some details and was able to create a cost plan with just a few clicks of the mouse. When more details were available, a new cost plan was quickly created again with just a few mouse clicks. The history of the cost plan revisions (iterations) is kept and any plan can be selected as the plan of record which means it is reflected in views, dashboards and reports.

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