Cost overrun?

 Your project is running slightly over budget. You mention this to another project manager, who suggests you shift some of your expenses to indirect costs that are not charged to your project budget. What do you do?

  1. Reestimate the project.

  2. Examine project expenses to see if any are indirect expenses that could be taken off your project.

  3. Fast track the project.

  4. Use your reserves.

 

I've based several of my practice tests on Fastrack so far, and shifted to Scordo. I choose (A) to ensure that my estimates for rest of the cost estimates have reduced uncertainity.  However, unless the question indicates that the cost overrun is caused by occurance of an identified but residual or actively accepted risk - i wouldnt have chosen D.

 

can someone help understanding why D is the right choice here and not A? 

B and C are obvious eliminations - so no confusion there.

 The best answer is A and definitely D is not as reserves are used only for unplanned but potentially required changes that can result from realized risks identified in the risk register.

I think again , it is blended with ethics,

your estimate again- approved bks you are in execution, not in planning.

now any change require approval/or change mgmnt system.

And Reserve is your approved fund.

dear @sspawar

i agree its blended with ethics, but unable to get why restimation is not the right choice. as per my understanding, it would be equally unethical to tap into contingent reserves for all cost overruns. those reserves are allocated for a certain risks - and we'd have no where to go if the risks eventually occur.

though the quesiton doesnt exactly say if the overrun is because of a risk - it also doesnt give us information on identified risk, unforeseen risk , or plain simple overrun.

request your response. 

dear @sspawar

i agree its blended with ethics, but unable to get why restimation is not the right choice. as per my understanding, it would be equally unethical to tap into contingent reserves for all cost overruns. those reserves are allocated for a certain risks - and we'd have no where to go if the risks eventually occur.

though the quesiton doesnt exactly say if the overrun is because of a risk - it also doesnt give us information on identified risk, unforeseen risk , or plain simple overrun.

request your response. 

Risks responses are planned ultimately in terms of cost or time or both.

Like Schedule Reserve , Cost Reserve is also ultimate response of risk.

I mean all risks ultimately converge in these 2 categories.

And reserves for any risk  can ultimately be kept only under these 2 heads.

Project Buffers/ %age of activity durations  are called time reseves

Like %age of each activity cost is called cost reserves. And up to certain limit (contengency), you are authorized to spend over.

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How you can go for re-estimation, while it is happening in actual. You are at execution. You are not in planning.

You may use reserve, instantly, you are impowered for. You can't stop work, till your re-estimation approval.   If you will not provide fund, and work gets stopped, is it not risk?

 You may later send change request for forthcoming work - with revised estimate based on AC + ETC (forecasted)

@sspawar, i thought reestimation of remaining work, including compression are valid techniques during monitoring controlling ?  ETC Bottom up is a reestimation of remaining work if our original plans are way off track , and same for schedules . may be i am missing something?

 Well, first off sorry that I reposted the question and did not look first. Secondly, I have prepared from Rita and whatever Prakash said, I agree with that because that's what I thought and based my understanding on that. Re-estimating is Mon and controlling so that can happen. Using reserves for 'anything' is not good! Because even reserves are planned and can't be used the way you wanted. 

Lastly , I think the question doesn't tell much. It it said, planned risk happened then yeah go for the reserve. If it states, unknown or unexpected event happened..sure go get permission to use management reserve. The way I understand is that  its a cost overrun - get me an indication of either poor planning or poor cost control and reserve is not an answer for that. You can't cover your errors using reserves. 

I don't know why but this question made me think that I had serious gap in my understanding! I hope it's not the case!!!!

@sspawar, i thought reestimation of remaining work, including compression are valid techniques during monitoring controlling ?  ETC Bottom up is a reestimation of remaining work if our original plans are way off track , and same for schedules . may be i am missing something?