PJM6025 Budget Assignment

Estimate Costs is the process of developing an approximation of the cost of resources needed to complete project work. Cost estimation accounts for each element required for the project and calculates a total amount that determines a project’s budget.

1. What does your current spend in aggregate and by resource and by month?

The method used to estimate for the months other than the provided is Highest of actuals. Since we are in 4th month of a 12 months project, we know that we are in the first quarter of the project. Generally, the first quarter comprises of the initiation and the planning phase. However, according to research a lot of investments goes in execution, monitoring and controlling of the project as well which are generally done during the later stage of the project. Therefore, we estimated that the highest of actuals will be required for rest of the months.

2. Do you have sufficient budget to complete the project?

CTG’s labor costs represent 70 percent of all costs of the overall EIM budget of $4.5 million, which sums up to be $3.15 million. According to the calculations above we can see that the cost of the project is estimated to be higher than the budget provided.

Cost estimated without contingency reserve = $3.23 million (approx.)

Budget provided = $3.15 million

Additional money required = $ 73,949

3. What contingency reserve should you ask for?

According to the information provided, project is in its fourth month of a 12-month duration. And generally according to standards the contingency reserve is taken to be 5% of the estimated cost of the project. However, since merely no data is provided for the project therefore, the contingency taken is to be 7% of the estimated cost, which is $225,676.4. However, since the budget cost is $4.5 million. Therefore, the contingency should also be calculated on the total budget which is 7% of $ 4.5 million - $315,000.

4. What are your assumptions about your estimates?

· We assume that the estimates will hold true till the end of the project without any changes.

· We assumed that the contingency reserve for this project is 7 percent of total costs.

· We assumed that labor costs and expenses for month 4 is not completed.

· We assume that the highest of actuals is estimated to be the labor cost for remaining months of the project.

Reference:

· Larson, E. W. & Gray, C. F. (2018). Project management: The managerial process (7th ed). New York, NY: McGraw-Hill.

·  Project Management Institute, (2017). A guide to the project management body of knowledge. (6th ed.) Newton Square, PA: Project Management Institute, Inc.

· Meredith, J. R, Shafer, S. M. & Mantel, S. J. (2017) Project management in practice (6th ed). Danvers, MA: John Wiley & Sons. 

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· The Enterprise Information Management system invoices.