1.1. Project budget and types of reserves
This section will present the definition and the accuracy estimating the project budget, and will explain the content of the project budget which will describe in more details the role of the different types of reserves and how it is calculated or estimated to complete the full form of the project budget estimation.
1.1.1. Project budget
Project budget could be defined as the amount of funds the project owner is willing to pay for the total project activities cost, to complete a certain project in an economical way (Oberlender G. , 2000). While, the project manager is one of the most important participant to keep the project actual cost in line with the estimated project budget through managing and controlling the additional costs resulting from less accurate estimation and unforeseen events that may face the project during the total project life cycle (YANG & CHEN,
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Moreover, numerous tools to estimate this amount will be discussed in the following sections. However, by adding the amount of contingency reserve to the amount of project cost estimate, we get the control accounts.
On the other hand, management reserve is considered to be the amount of money allocated to cover the unknown-unknown risks that may face the project. Finally, the total project budget is the sum of the project activities cost estimate, contingency reserve estimate and management reserve estimate, which is illustrated in figure (2-1)
Moreover, (Touran, Ali; Zhang, Ye, 2011) agree that the risks that may face the project could be divided into two parts known-unknown risks, which are covered by contingency reserve amount, and unknown-unknown risks which are covered by management reserve
Loss of customers due to production outages caused by various events, such as natural disasters, change management, unstable software, and so on
The Zapatista rebellion in Chiapas, Mexico got worldwide attention on January 1, 1994, when they marched to Mexico City against the signing of the North America Free Trade Agreement (NAFTA). The free trade agreement was intended to facilitate trading between Canada, United States, and Mexico. The Zapatista claimed that this agreement would affect the indigenous people of Chiapas by further widening the gap between the poor and the rich. In this paper I will examine the NAFTA agreement and the Zapatista’s ideology and claims against the NAFTA agreement to see whether or not any real effects have risen within the indigenous people of Chiapas Mexico and in Mexico as a whole.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
At the beginning of any project, a project manager along with the management team will create an estimate of time and costs, which will lead to the initial approved budget amount. As most project managers know, "Past experience is a good starting point for developing team and cost estimates.
In all aspects, risk assessments should measure the risks and foretell the impact of the project. Project management utilize risk assessments in order to
Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
Risk management is a major success key of project management in business world. With major budget overruns in parallel with significant delays, Sydney Opera House is a real example of poor risk management. Risk management requires effective planning, budgeting, and scheduling. First of all, the highest risks should be identified and evaluated in order to find methods to reduce their impact and exposure. Then, factors that cause risk should be addressed while factors that only correlate with the negative impact but do not affect it may be omitted. At this stage, interrelation between various risks should be accounted for to spot the core factors that should be treated in order to ensure effectively and stability of the project's functioning.
A budgetary estimate is used to allocate money into an organization's budget. Many organizations develop budgets at least two years into the future. Budgetary estimates are made one to two years prior to the software project completion. The accuracy of budgetary estimates is typically ten percent below to twenty-five percent above the actual final cost of the project.
To test the financial feasibility and plan acceptability, there must be information on the magnitude, and share of estimated project cost that are reimbursable. This information can be derived from cost allocation. Also where cost sharing is required in the multipurpose planning process cost allocation can be applied. Cost allocation also provides information necessary for allocating the real expenditures ensuring that the cost account are maintained in line with plan formulation and allocation principles during the subsequent c...
Project management is said to be completed within time when it completed within the “triple constraints”: cost, time and quality. And in a lot of causes, one them is sacrificed so as to meet the other two. Project managers prioritize which ones are the most important.
Brooke (1997), explains Estimation as the technical procedure of anticipating the value of the project. Building construction estimation is the process of acquiring the construction value for the whole project before the project starts. Thus, construction attaining process depends hugely on financial management to sustain workability and smooth operations. The delay in construction is a global issue which is due to improper preparation of estimates and lack of drawings (Ajanlekoko, 1987). In accordance to Gkritza (2008), the source of delay in a project are identified to be in the initial stages, like bad quantification, errors in design and ground conditions. Thus, the purpose of a proper estimate is to foretell the cost needed to finish the
Capital budgeting is one of the primary activities of a company. Most of the company uses capital budgeting for decision making process of selecting and evaluating long-term investment. The company have to make a right decision with respect to investment in fixed asset such as purchasing of new equipment and delivery vehicles, constructing additions to buildings and many more. The decision must be right because of the project involve huge amount of cash outflow and it is committed for many years.
When planning a new project, how the project will be managed is one of the most important factors. The importance of a managers will determine the success of the project. The success of the project will be determined by how well it is managed. Project management is referred to as the discipline that entails the processes of carefully planning, organizing, controlling, and motivating the organization resources so as to foster and facilitate the achievement of specific established and desired goals and meet the specific criteria of success required in the organization (Larson, 2014). Over the course of this paper I will be discussing and analyzing the importance of project management.
Project management involves all activities that encompass scheduling, planning, and controlling projects. A successful project manager ensure that an organization’s resources are being used both efficiently and effectively. Most projects need to be uniquely developed require a sense of customization and the ability to adapt to any posed challenges. The scope of effective project management includes defining what the project is and what is being expected to be accomplished. Projects are imposed to fulfill a certain need and project managers must have the ability to create the proper definition. Goals and the means used to attain those goals have to be clearly stated. Project Managers must also have the ability to plan
In this competitive world, companies have to deal with various types of risk all the time with there projects. Generally, it affects the budget and schedule of the project. So it is important to keep in mind the risk management strategies while creating an initial project plan.