PM FPX 5333 Assessment 1 Budget Analysis Report

Student Name

Capella University

PM-FPX5333 Project Budgeting, Procurement, and Quality

Prof. Name

Date

Budget Analysis:

A report on budget analysis is utilized to ascertain the correlation between funds and the management of a project. This report will also determine whether the budget is adequate and practical for completing the project. Throughout the budget analysis report, an evaluation of the budget will be conducted to ascertain the financial status of the project. Additionally, the report will extract information from prior projects and their outcomes. The crucial step in completing a budget analysis report is identifying the failure points of the project and proposing turnaround project budgets.

Project Summary:

Nearly Free is an IT Governance company aiming to develop an employee orientation learning module. This module will include at least one quiz and a sign-off document. Completion of the orientation is mandatory for all new employees to ensure understanding of the provided information. The project has a budget of $25,000 and a timeline of approximately three months. The project involves various steps, such as planning, designing, development, testing, changes, retest, and closeout. However, the project appears to be encountering challenges and surpassing the budget. This budget analysis report aims to identify issues and propose solutions to turnaround the project.

Financial State:

Upon reviewing Nearly Free’s cost estimate techniques, it appears that the project is likely to exceed the budget. The budget for the employee training/orientation project is approximately $30,000. With development, integration, testing, training, controlling, and project closure still pending, the project baseline has already reached $22,000. Considering the remaining tasks and less than $10,000 left in the budget, the project is at risk of exceeding the budget and possibly missing crucial aspects. Overrunning the budget may jeopardize the project’s success, potentially due to the use of inaccurate analogous cost data estimating or parametric estimating. These cost estimates should be completed early in the project to provide a more accurate total cost.

Cost of Individual Schedule Activities/WBS:

The Work Breakdown Structure (WBS) breaks down the orientation site into tasks spanning 92 days. The initiation phase, costing about $3,000, involves reviewing the charter, developing the project, and obtaining charter approval. The planning phase, costing approximately $10,000, includes tasks such as reviewing the project plan, developing the project, conducting the kickoff, and obtaining project plan approval. The execution phase, with eight tasks over 48 days, costs about $25,000. The closeout phase, spanning 89.5 days with three tasks, costs $1,000. Notably, these are new estimated costs for these phases/tasks.

Failure Points:

Several failure points have emerged throughout the project, including:

• Lack of budget for the initiation phase
• Inaccurate budget estimates
• Failure to consider employee pay as part of the budget
• Lengthy testing and repairs/changes
• Absence of a budget for status reports
• Inadequate time between phases
• Lack of risk mitigation/management

Project Report:

Milestones:

Planned Dates and Actual Dates, along with comments, for each phase are detailed in the project report.

Risk Impact Probability:

Various risks, including employee availability, resources not available, cyber security, failed testing, delay in schedule, and budget overspend, are outlined with their respective impact probabilities.

Total Cost Ownership:

Total cost ownership, a concept crucial for business owners and investors, is calculated by considering the initial acquisition cost in comparison to the annual maintenance and support costs. Estimated total cost ownership for this project is around $62,000.

Return on Investment:

Return on investment is vital for investors to ensure a profitable venture. The estimated return on the Nearly Free project is approximately 92 days, though challenges may hinder obtaining the full return. A recalculation of the budget could potentially yield a return of 70-80% upon project completion.

Contingency Reserves:

Contingency reserves, amounting to 10-15 thousand, are recommended to cover unforeseen expenses and labor, particularly since labor was initially overlooked in the budget.

Project Budget:

The original budget of $30,000 is insufficient and lacks considerations for labor and risk management. The revised budget should range between $50,000 and $60,000 to address all issues and cover labor expenses. Techniques such as cost aggregation, historical relationships, and reserve analysis should be employed to ensure accuracy in the new budget.

Reference:

Harned, B. (2019, April 23). Work Breakdown Structure (WBS) In Project Management. Retrieved from https://www.teamgantt.com/blog/how-to-estimate-projectsaccurately-using-a-work-breakdown-structure

Project Management Knowledge (2019). Contingency Reserve. Retrieved from https://project-management-knowledge.com/definitions/c/contingency-reserve/

Reh, John F. (2019, May 30). A Guide for Managers to Understand Total Cost of Ownership (TCO). Retrieved from: https://www.thebalancecareers.com/total-costof-ownership-tco-2276009

PM FPX 5333 Assessment 1 Budget Analysis Report