Project Estimating And Cost Management (project Management Essential Library)

PROJECT ESTIMATING AND COST MANAGEMENT The books in the Project Management Essential Library series provide project managers with new skills and innovative approaches to the fundamentals of effectively managing projects. Additional titles in the series include: Managing Projectsfir Value, John C . Goodpasture -.. 1 Effective Work Breakdown Structures, Gregory T. Haugan Project Phnning and Scheduling, Gregory T. Haugan Managing Project Quality, Timothy J. Kloppenborg and Joseph A. Petrick Project Measurement, Steve Neuendorf Project Risk Management: A Proactive Approach, Paul S . Royer Iff MANAGEMENTCONCEPTS www.managementconcepts.com PROJECT ESTIMATING AND COST MANAGEMENT Parviz F. Rad (If MANAGEMENTCONCEPTS Vienna, Virginia Iff MANAGEMENTCONCEPTS 8230 Leesburg Pike, Suite 800 Vienna, VA 22182 (703) 790-9595 Fax: (703) 790-1371 www.managementconcepts.com Copyright O 2002 by Management Concepts, Inc. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by an information storage and retrieval system, without permission in writing from the publisher, except for brief quotations in review articles. Printed in the United States of America Library of Congress Cataloging-in-Publication Data Rad, Parviz F., 1942Project estimating and cost management1Parviz F. Rad. p. cm. - (Project management essential library) Includes bibliographical references and index. ISBN 1-56726-144-2 (pbk.) 1. Cost control. I. Title. 11. Series. TS 167.R43 2001 658.15'52--dc21 About the Author Parviz F. Rad holds an M.Sc. from Ohio State University and a Ph.D. from the Massachusetts Institute of Technology He has more than 30 years of professional experience, during which he has served in governmental, industrial, and academic capacities. He has participated in project management activities and in the development and enhancement of quantitative tools in project management in a multitude of disciplines, including software development, construction, and pharmaceutical research. Dr. Rad is a professional civil engineer, a certified cost engineer, and a project management professional. I Dedicate This Book to the Memory ofMy Parents Table of Contents Preface ..................................................xi ... Acknowledgments ......................................... xlll CHAPTER 1 Introduction .................................. 1 Project Scope and Objectives ........................ 2 Organizational Objectives ...........................5 Project Selection ..................................6 CHAPTER 2 Deliverable-Oriented Work Breakdown Structure ........................ 11 Work Breakdown Structure ........................ 12 WBS Development Steps .......................... 13 The Division Bases ............................... 13 Case Example: WBS for an Industrial Complex ......... 15 Comparison of the Different Bases ................... 16 Process-Oriented Projects .......................... 17 Organizational Priorities ........................... 19 Semantics ...................................... 21 Changing the Paradigm ........................... 22 CHAPTER 3 .............. 27 ................ 28 Nomenclature. Dimensi