Dollar Sizing the Cost Account

Apart from any qualitative management considerations regarding effective control of cost accounts, there are some quantitative implications to "large" and "small" accounts. The quantitative implications arise from the variance estimates that are a direct consequence of the distance between the most pessimistic dollar value and the most optimistic dollar value of a cost account probability distribution. The larger the account, the greater is the pessimistic-optimistic distance and the greater is the amount at stake in dollars.

The concept of larger dollar risk with larger cost accounts is intuitive but has a statistical foundation. The statistical foundation can provide guidance to the project manager regarding practical approaches to subdividing cost accounts to mitigate risk. It turns out that the same phenomenon occurs in scheduling with "long" tasks. Indeed, when you think about it, planning involves not only sizing the cost accounts for dollars, but also sizing for schedule. In fact "right sizing" for dollars may well lead the project manager toward "right sizing" for schedule. Because of the coupling between right sizing for cost and right sizing for schedule, we will defer the quantitative discussion until Chapter 7.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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