Cost-benefit analysis is of more importance to project managers throughout the project life cycle.
together with the business need, cost-benefit analysis will form the business case to justify the benefits that deserve the investment in the project.
At start of each phase, the project manager should evaluate that the project remains aligned with the business need and the expected business value by performing cost-benefit analysis.
This analysis is necessary while planning project quality to compare the cost of quality with the benefits of increased profit, decreased cost, decreased rework, increased stakeholders satisfaction, increased productivity, and achieving high morale.
Another need to perform cost-benefit analysis is when comparing alternatives such as Make-or-buy analysis.
The project manager will need to perform cost-benefit analysis at any time he has a doubt regarding the deviation from the project goals or when changes occurs in the environment or the market place such as a new competitor producing the same project outcome.
Finally at project closure, in order to assess the project success, definitely you will need to preform cost-benefit analysis. Saving Changes...
Do you have a simple HL template? The project is to determine the cost and benefits to migrate a team of 20 to a new platform, where the cost is based on the license/seat Saving Changes...
Manuel PerezProject Management Coordinator| Las Vegas Valley Water DistrictNorth Las Vegas, Nv, United States
Based on some past experiences, the cost-benefit analysis enter in play before the project approval, and sometimes during the project gateway (moving from phase to phase), to determine if the project should be done or continued. Any deviation from the initial cost-benefit analysis and/or business case justification, needs to be reported to the project sponsor and key stakeholders identified in the communication matrix. They will determine if they wish to proceed to the next phase or cancel the project. Is better to have sunk costs than to invest additional funding into a project that will not deliver the benefits. Saving Changes...
While doing cost-benefit analysis, we should focus both on tangible as well as intangible benefits. All the tangible benefits must be measurable consistent and believable. However, we must identify what benefits we are interested in, before starting the analysis. Tangible benefits analysis includes measurable benefit to customer, productivity gain, RoI, payback period, net present value (must be positive), cost of risk Mgmt. cost avoidance, cost of delay, market value etc. Intangible benefits can include the brand name, IPR, trademarks, copyrights, Patents, goodwill, return to society etc. Sometimes, companies spend lot of money just to establish the brand name. Intangible benefits can be calculated broadly by subtracting net assets from the fair market value of the company. Cost- benefit analysis should be done very meticulously. After all, money matters as we are doing business with the defined objectives. Saving Changes...
The PM point of view for business-case analysis varies depending if you are customer PM or main contractor PM, where customer PM will be more concerned with cost-benefit analysis of ongoing project on customer business need , while being contractor PM would be more concerned with cost-benefit analysis of project for contractor business volume & market position Saving Changes...
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