Enterprise

Sample Solution

1. Talk to the person who developed the cost estimate. I would want to understand why the estimate is 20% higher than previous projects. Is it due to a difference in scope? Are there any new risks or challenges that need to be considered?
2. Review the historical data for similar projects. I would want to see if there are any patterns or trends that could explain the higher cost estimate.
3. Get input from other stakeholders. I would want to get input from other stakeholders, such as the project sponsor, the technical leads, and the finance team. This would help me to get a more complete understanding of the situation and to make a better decision

Full Answer Section

1. Make a decision about the cost estimate. Based on my analysis, I would make a decision about whether to accept the cost estimate, negotiate a lower cost, or cancel the WBS item altogether.

It is important to note that I would not make a decision about the cost estimate without first understanding the reasons for the higher estimate. It is also important to get input from other stakeholders before making a decision. By following these steps, I can make a more informed decision about the cost estimate and ensure that the project is successful.

2. Together with your team, you have applied three-point estimation to a critical path consisting of two activities. The following duration uncertainties are calculated assuming a confidence interval of ±3 sigma. The duration uncertainty -defined as the pessimistic estimate minus the optimistic one- of the first activity is 18 days; the second estimate has an uncertainty of 24 days. Applying the PERT formula, what is the duration uncertainty of the entire path?

The PERT formula for calculating duration uncertainty is:

Duration uncertainty = (Pessimistic estimate - Optimistic estimate) / 6

In this case, the duration uncertainty of the first activity is 18 days / 6 = 3 days.

The duration uncertainty of the second activity is 24 days / 6 = 4 days.

The duration uncertainty of the entire path is 3 days + 4 days = 7 days.

3. Your project has exceeded costs in the past due to underestimation of resource costs at the cost baseline: PV: $1,200,000, EV: $1,000,000, AC: $1,200,000. You expect underestimation to influence the future as much as it did in the past. If the BTC (Budget to Complete) is $1,000,000, what should your new EAC (Estimate at Completion) be?

The Estimate at Completion (EAC) is the total cost that is expected to be incurred to complete the project. The Budget at Completion (BAC) is the total budget that was approved for the project.

In this case, the BAC is $1,200,000. The EV is $1,000,000, which means that the project is $200,000 under budget. However, the AC is $1,200,000, which means that the project is $200,000 over budget.

The project has exceeded costs in the past due to underestimation of resource costs. You expect underestimation to influence the future as much as it did in the past. This means that you should expect the project to go over budget by $200,000.

The EAC is calculated as follows:

EAC = BAC + (BAC - EV)

In this case, the EAC is:

EAC = $1,200,000 + ($1,200,000 - $1,000,000) = $1,400,000

Therefore, the new EAC should be $1,400,000.

It is important to note that this is just an estimate. The actual EAC may be higher or lower, depending on the factors that influence the project cost. However, this estimate provides a good starting point for planning and budgeting for the project.