What is meant by a management cost and control system (MCCS)?
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A two-cycle process: A planning cycle (referred to as planning and control) and
... [Show More] an operating cycle (referred to as the cost control system)
The planning and control system must help management project the status toward objective completion
Its purpose is to establish policies, procedures, and techniques that can be used in the day-to-day management and control of projects and programs
It must provide information that:
- Gives a picture of true work progress
- Will relate cost and schedule performance
- Identifies potential problems with respect to their sources
- Provides information to project managers with a practical level of summarization
- Demonstrates that the milestones are valid, timely, and auditable
In addition to being a tool by which objectives can be defined (i.e., hierarchy of objectives and organization accountability), exists as a tool to develop planning, measure progress, and control change
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As a tool for planning, the system must be able to:
- Plan and schedule work
- Identify those indicators that will be used for measurement
- Establish direct labor budgets
- Establish overhead budgets
- Identify management reserve
As a tool for measuring progress and controlling change, the systems must be able to:
- Measure resources consumed
- Measure status and accomplishments
- Compare measurements to projections and standards
- Provide the basis for diagnosis and replanning
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Cost control implies good cost management, which must include:
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Cost estimating, cost accounting, project cash flow, company cash flow, direct labor costing, overhead rate costing, and other tactics such as incentives, penalties, and profit-sharing
Guidelines of the MCCS
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- The level of detail is specified by the project manager with approval by top management
- Centralized authority and control over each project are the responsibility of the project management division
- For large projects, the project manager may be supported by a project team for utilization of the MCCS
Project planning and control systems identifiable design requirements
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- A common framework from which to integrate time, cost, and technical performance
- Ability to track progress of significant parameters
- Quick response
- Capability for end-value prediction
- Accurate and appropriate data for decision-making by each level of management
- Full exception reporting with problem analysis capability
- Immediate quantitative evaluation of alternative solutions
MCCS planning activities
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- Contract receipt (if applicable)
- Work authorization for project planning
- Work breakdown structure
- Subdivided work description
- Schedules
- Planning charts
- Budgets
MCCS planning charts are worksheets used to create the budget. These charts include planned labor in hours and material dollars. MCCS planning is accomplished in one of these ways:
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- One level below the lowest level of the WBS
- At the lowest management level
- By cost element or cost account
An appropriate system must consider a:
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Cost-benefit analysis
Project benefits
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Planning and control techniques facilitate:
- Derivation of output specifications (project objectives)
- Delineation of required activities (work)
- Coordination and communication between organizational units
- Determination of type, amount, and timing of necessary resources
- Recognition of high-risk elements and assessment of uncertainties
- Suggestions of alternative courses of action
- Realization of effect of resource level changes on schedule and output performance
- Measurement and reporting of genuine progress
- Identification of potential problems
- Basis of problem-solving, decision-making, and corrective action
- Assurance of coupling between planning and control
Project cost
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Planning and control techniques require:
- New forms (new systems) of information from additional sources and incremental processing (managerial tie, computer expense, etc.)
- Additional personnel or smaller span of control to free managerial time for planning and control tasks (increased overhead)
- Training in use of techniques (time and materials)
A well-disciplines MCCS will produce the following results
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- Policies and procedures that will minimize the ability to distort reporting
- Strong management emphasis on meetings commitments
- Weekly team meetings with a formalized agenda, action items, and minutes
- Top-management periodic review of the technical and financial status
- Simplified internal audit for checking compliance with procedures
Disciplined use of MCCS is designed to put pressure on the project manager to perform exceptionally good project planning so such changes will be minimized:
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- Make retroactive changes to budgets or costs for work that has been completed
- Rebudget work-in-progress activities
- Transfer work or budget independently of each other
- Reopen closed work packages [Show Less]