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    Group 1 Presentation - Cost Aggregation

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    Mellinda James
    Cost aggregation is the process of summing the costs of individual work packages to control costs at the project level. This involves breaking down projects into work packages and estimating costs for each package. The costs are then aggregated according to time periods to create a project budget and cash flow forecast. Cost aggregation provides visibility of scheduled spending and allows project managers to control costs at the work package level. While useful for budgeting and cost control, it requires expertise and time to implement.

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    Group 1 Presentation - Cost Aggregation

    Uploaded by

    Mellinda James
    16 views12 pages
    Cost aggregation is the process of summing the costs of individual work packages to control costs at the project level. This involves breaking down projects into work packages and estimating costs for each package. The costs are then aggregated according to time periods to create a project budget and cash flow forecast. Cost aggregation provides visibility of scheduled spending and allows project managers to control costs at the work package level. While useful for budgeting and cost control, it requires expertise and time to implement.

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    Cost aggregation is the process of summing the costs of individual work packages to control costs at the project level. This involves breaking down projects into work packages and estimating costs for each package. The costs are then aggregated according to time periods to create a project budget and cash flow forecast. Cost aggregation provides visibility of scheduled spending and allows project managers to control costs at the work package level. While useful for budgeting and cost control, it requires expertise and time to implement.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    16 views12 pages

    Group 1 Presentation - Cost Aggregation

    Uploaded by

    Mellinda James
    Cost aggregation is the process of summing the costs of individual work packages to control costs at the project level. This involves breaking down projects into work packages and estimating costs for each package. The costs are then aggregated according to time periods to create a project budget and cash flow forecast. Cost aggregation provides visibility of scheduled spending and allows project managers to control costs at the work package level. While useful for budgeting and cost control, it requires expertise and time to implement.

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    GROUP ONE PRESENTATION

    Cost Aggregation
    • All organizations need to have a budget.

    Budget is the total amount of money allocated for a


    particular project. Building a budget is necessary for
     project management.
     There are many project management tools used to
    determine the budget of a particular project and one of
    them is Cost Aggregation.
    Definition

     Cost aggregation is defined as summing the cost for the


    individual work package to control the financial account
    up to the project level.

     This is achieved by the summation of the lower-level cost


    estimates that are associated with different work
    packages within the work breakdown structure.
     This information is aggregated according to time periods
    to see the scheduled spending per time period, i.e. Cash
    flow

     It is referred as the main technique for budgeting.

     In most cases, the cost aggregation is coupled with other


    tools to determine the budget such as funding limit
    reconciliation and reserve analysis.
    Example

     Consider a project for construction of a new 1km


    Access road 8m wide for Zvimba Rural District
    Council
        Month 1 Month 2 Month 3 Month 4 Total
    1 Site clearance 36 000.00       36 000.00
    2 Earthworks 48 000.00 36 000.00     84 000.00
    3 Surfacing     60 000.00   60 000.00

    Stormwater
    4 drainage 10 000.00 10 000.00 10 000.00 10 000.00 40 000.00

      Total 94 000.00 46 000.00 70 000.00 10 000.00 220 000.00


    How to produce the budget

     Considering item 2 Earthworks,

      Earthworks Month 1 Month 2

    1 Removal of top soil 12 000.00  

    2 Sub grade formation 24 000.00  

    3 Base 2 formation 12 000.00 12 000.00

    4 Base 1 formation   24 000.00

      Total 48 000.00 36 000.00


    Removal of top soil (Work package)

      Removal of top soil Month 1

    1 Hire of grader 6 000.00

    2 Diesel 4 000.00

    3 Plant operator 1 000.00

    4 Other 1 000.00

      Total 12 000.00
    Advantages
     It allows the PM team to see scheduled spending for every time
    period.
     This will allow project managers to see the activities as well as
    the corresponding costs
     It allows the PM to control the use of cost at the work package
    level.
     Doing cost aggregation is very important because it allows the
    project manager to control the use of cost at the working level.
    This will ensure that the project will be easily funded all
    throughout its life cycle. (PMBOK 5th Edition)
    Limitations

     It is costly because it requires use of experts to produce


    the cost aggregation.

     It is time consuming.

     It is difficulty to do cost projections in hyper inflationary


    environment

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