Abstract
It is the total sum of money allocated for the specific project for a specific period of time. The goal of the project budget is to cost control. The objective of this chapter is to give the implication of budgeting on contemporary project management. The main focus of this chapter is to discuss the introduction, history, agile approach, etc. It has a direct impact on the company's financial feasibility. The research would discuss the approaches for the projects budget estimation and various steps for cost control. There are two types of reserves against risks: one is the contingency reserve for identified risk, and the other is the management reserve for unidentified risks. The project manager needs to be aware of existing resources acquisition policies, guidelines, and procedures. The author discusses the procedures for project budgeting and methods for evaluation of project budgeting.
TopIntroduction
A project is derived from Latin word “Pro” means Forward and “Jacerc” means throw (Project Management Institute, 2013). According to the PMBOK Guide, project management consists of five process groups; Initiation, Planning, Executing, Monitoring & Controlling and Closing (Project Management Institute, 2013). In Traditional Project Management (TPM) these are done in a linear and incremental fashion. In Agile Project Management (APM) these are done in a more iterative and adaptive way (Wysocki, 2014).
Project Management Institute (2013) confirmed that Project management is described as the processes where project objectives and achievement has been controlled and associated with the final result. Project management involves strategic planning and controlling of the project and the purpose of project management is:
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To prepare framework of the requirement and of the work,
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To decide the level of work,
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To allocate the required resources, and
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To plan the implementation of the work.
These people were serving their major roles of as project managers. They had to carefully think about all the processes of the project starting with planning phase to execution and monitoring phase all the way to closing of the project.
During the 1950s, Navy engaged modern project management policies in their Polaris project. During the 1960s and 1970s, Department of Defence, NASA, and biggest engineering and construction companies employed project management principles and tools to accomplish large budget, schedule - driven projects. In the 1980s, manufacturing and software development sectors started to implement and grape sophisticated project management practices / methods. By the 1990s, the project management theories, tools, and techniques were widely used by different industries and organizations.
Contemporary project management shows the tried - and - true project management techniques along with modern developments such as the most current versions of Microsoft Project Professional 2016, the Guide to the Project Management Body of Knowledge (PMBOK Guide), and many other approaches developed from adaptive (Agile) project management like Scrum, Kanban, Hybrid, and XP etc. Contemporary project management also uses many tools and techniques and considerations that come from modern approaches to quality and communications, role define, leadership principles, human strengths, and many other sources.
Budget
Budgeting is the process of preparing budgets. It is essentially a managerial process concerned with planning, co - ordination and control. It is a plan which included all the phases of operation of a business for a definite period of time. It is prepared for a future period and it expresses everything in numerical terms.
According to Koontz & O’Donnell define, Budgets are statements of anticipated results, in financial terms as in revenue and expense and capital budgets or in non - financial terms as in budgets of direct labour - hours, physical sales volume, materials, on units of production. The analysis shows that budget is:
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A statement of estimated or expected results,
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Stated in quantitative terms,
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Always for a specific future period of time, and
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Prepared to achieve specific objectives.
Key Terms in this Chapter
Cost of Good Quality (CoGQ): Cost of activities needed to prevent quality failures + costs of quality appraisal activities.
Three-Point Estimation: Take the best, worst, and most likely case estimates to do the average.
Parametric Estimation: Using data and applied them to the current project to advise the total.
Bottom-Up Estimation: Rate the individual parts of the project plan and top them up.
Liberalism: It involved the ideas of capitalism, the division of labour that an industrious lifestyle would lead to wealthy societies.
Analogous Estimation: Analyse the data in similar projects to decide the cost.
Cost of Poor Quality (CoPQ): The expenses of the project may incur as a result of internal quality failures (e.g., product re - design, waste of time and material resources, etc.) + expenses the project may incur as a result of external quality failures (e.g., customer complaints, shipping errors and damages, etc.).
Top-Down Estimation: Figure out the total and then split it into tasks or milestones.
Total CoQ: CoGQ + CoPQ.
Newtonianism: It means applying scientific observations to developing the “classical school” of scientific management.