The document discusses project cost management processes including planning, estimating, budgeting, and controlling costs. It defines key terms and outlines the inputs, tools/techniques, and outputs of several important cost management processes:
1) Plan Cost Management establishes how project costs will be estimated, budgeted, managed, monitored and controlled through developing a cost management plan.
2) Estimate Costs involves developing cost estimates for project resources using techniques like expert judgment, analogous estimating, and bottom-up estimating.
3) Determine Budget aggregates cost estimates to establish an authorized cost baseline against which performance can be monitored and sets the project funding requirements.
The document discusses project cost management processes including planning, estimating, budgeting, and controlling costs. It defines key terms and outlines the inputs, tools/techniques, and outputs of several important cost management processes:
1) Plan Cost Management establishes how project costs will be estimated, budgeted, managed, monitored and controlled through developing a cost management plan.
2) Estimate Costs involves developing cost estimates for project resources using techniques like expert judgment, analogous estimating, and bottom-up estimating.
3) Determine Budget aggregates cost estimates to establish an authorized cost baseline against which performance can be monitored and sets the project funding requirements.
The document discusses project cost management processes including planning, estimating, budgeting, and controlling costs. It defines key terms and outlines the inputs, tools/techniques, and outputs of several important cost management processes:
1) Plan Cost Management establishes how project costs will be estimated, budgeted, managed, monitored and controlled through developing a cost management plan.
2) Estimate Costs involves developing cost estimates for project resources using techniques like expert judgment, analogous estimating, and bottom-up estimating.
3) Determine Budget aggregates cost estimates to establish an authorized cost baseline against which performance can be monitored and sets the project funding requirements.
The document discusses project cost management processes including planning, estimating, budgeting, and controlling costs. It defines key terms and outlines the inputs, tools/techniques, and outputs of several important cost management processes:
1) Plan Cost Management establishes how project costs will be estimated, budgeted, managed, monitored and controlled through developing a cost management plan.
2) Estimate Costs involves developing cost estimates for project resources using techniques like expert judgment, analogous estimating, and bottom-up estimating.
3) Determine Budget aggregates cost estimates to establish an authorized cost baseline against which performance can be monitored and sets the project funding requirements.
PMBOK - includes the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget. Primarily concerned with the cost of the resources needed to complete project activities.
Process Name Process Group Key Outputs
Plan Cost Planning Cost Management plan Management Cost Estimates, Basis of Estimate Cost Planning Estimating Cost Baseline, Project Determine Budget Planning Funding Requirements Work Performance Monitoring and Control Costs Information, Change Controlling Requests, Cost forecasts Project Cost Management - Terms Value Engineering Aka, value analysis is finding a less costly way of doing work. It will look how to achieve a goal/scope the less costly way
Cost Explanation Type Costs that stay same throughout the life of a project . I.E. Fixed bulldozer Variable Costs that vary on a project. I.E. hourly labor, fuel for bulldozer Expenses billed directly to the project. I.E. materials used to Direct construct bldg Costs that are shared & allocated among several or all projects. Indirect i.e. mgr’s salary. Costs that have been invested into or expended upon the Sunk project. Sunk costs are like spilt milk. Plan Cost Management
Defining how the project costs will be estimated, budgeted,
managed, monitored, and controlled. It provides guidance and direction on how the project costs will be managed throughout the project. Plan Cost Management - ITTO
INPUTS TOOLS AND TECHNIQUES OUTPUTS
1.Project Charter 1.Expert Judgment Cost Management Plan 2.Project Management Plan 2.Data Analysis Schedule Management Plan 3.Meetings Risk Management Plan Enterprise Environmental Factors Organizational Process Assets Plan Cost Management - Inputs
Project Management Plan
Project Charter Enterprise Environmental Factors Organizational Process assets Plan Cost Management - Tools Expert Judgment Data Analysis Reviewing strategic funding such as self-funding or funding with equity. Meetings Plan Cost Management - Output Cost Management Plan How costs will be planned, structured and controlled Units of measure Level of accuracy Reporting formats Control thresholds Estimate Costs Developing an approximation of the cost of resources needed to complete project work. Usually expressed in some from of currency, $, Euro, Yen, Won, etc.. Accuracy of a project estimate will increase as the project progresses through the project life cycle Costs are estimated for all resources that will be charged to the project including but is not limited to labor, materials, equipment, services, and facilities, as well as special categories such as an inflation allowance, cost of financing, or contingency costs. Estimate Cost - Types Definitive Estimates: –5% to +10% Budget Estimates: –10% to +25% Rough Order of Magnitude Estimates: –25% to +75% Estimate Costs
TOOLS AND TECHNIQUES
1.Expert Judgment INPUTS 2.Analogous Estimating 1.Project Management Plan 3.Parametric Estimating OUTPUTS Cost Management Plan 4.Bottom-up Estimating 1.Cost Estimates Quality Management Plan 5.Three-Point Estimating 2.Basis of Estimates Scope Baseline 6.Data Analysis 3.Project Documents Updates 2.Project Documents Alternatives Analysis Assumption Log Lessons Learned Register Reserve Analysis Lessons Learned Register Project Schedule Cost of Quality Risk Register Resource Requirements Project Management Information Risk Register System 3.Enterprise Environmental Factors Decision Making 4.Organizational Process Assets Voting Estimate Costs - Inputs The Project Management Plan Cost Management Plan Scope Baseline Quality Management Plan Project Documents Project Schedule Risk Register Lessons Learned Register Resource Requirements Enterprise Environmental Factors Organizational Process Assets Estimate Costs - Tools Expert Judgment Analogous Estimating Top down, Pasted projects, Not very detailed Parametric Estimating Statistical relationships between historical data and variables 8 hour work period, lay 50 cubic feet of concrete 1 hour work period, paint 32 square feet of drywall
Bottom-up Estimating Separate estimate for each activity and aggregated up to summary nodes on WBS Greatest Level of specified detail Highly accurate, labor intensive Estimate Costs - Tools Pert, Three point Estimating (Covered in Schedule Management) Data Analysis Reserve Analysis (Money set aside for Risk) Cost of Quality Failure Internal caused, (may need to rework, scrap) External caused, (Warranty work, Lost of business) Leads to rework and increasing spend rate Success Training, proper equipment, inspections PMIS Decision Making Estimate Costs - Output Cost Estimates Costs associated with each activity. This includes labor, materials, equipment, facilities, inflation, services, etc… Basis of Estimates Range of possible estimates Confidence level of estimates How estimates were developed and by whom Project Document Updates Determine Budget Process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. It determines the cost baseline against which project performance can be monitored and controlled. Determine Budget - ITTO INPUTS 1.Project Management Plan Cost Management Plan Resource Management Plan Scope Baseline Project Documents TOOLS AND TECHNIQUES OUTPUTS Basis of Estimates 1.Expert Judgment 1.Cost Baseline Cost Estimates 2.Cost Aggregation 2.Project Funding Requirements Project Schedule 3.Data Analysis 3.Project Documents Updates Risk Register Reserve Analysis Cost Estimates Business Documents Historical Information Review Project Schedule Business Case Funding Limit Reconciliation Risk Register Benefits Management Plan Financing Agreements Enterprise Environmental Factors Organizational Process Assets Determine Budget – Inputs The Project management Plan Cost Management Plan Scope Baseline Resource Management Plan Project Documents Cost Estimates Basis of Estimates Project Schedule Risk Register Business Documents Business Case Benefits Management Plan Agreements Enterprise Environmental Factors Organizational Process Assets Determine Budget - Tools Expert Judgement Cost Aggregation Details on what each schedule activity is scheduled to cost. These will be rolled up to each parent work package to determined total cost and budgetary requirements Data Analysis Reserve Analysis, Possible Contingency reserves for the project Contingency Reserves: The PM determines, manages, and controls the contingency reserves, which will address the cost impact of the remaining or known/unknown risks Management Reserve: The management determines the funds to cover known/ unknown risks to the project Designed for possible risk obstacles to the Baselines Historical Information Review Parametric or Analogous estimates based off historical projects Best used when project are very similar in nature Determine Budget - Tools Funding Limit Reconciliations Projects current run rate vs. what was planned over the life cycle of the project. Sections of the project may need to be reschedule due to budget limitations Financing Acquiring money for the project from an external source Determine Budget Output Cost Baseline Includes the cost of all the activities, that are aggregated to work packages. The work packages and the contingency reserves are aggregated into control account. The sum of all control account is the cost baseline. Typically displayed in a S-Curve graph.
The cost baseline represents the project cost,
which includes the contingency reserves. The project budget is the cost baseline + management reserves. Project Funding Requirements What gets funded when and by how much. Is there a trigger point, Milestone point, etc.. Project Document Updates Control Costs Monitoring the status of the project to update the project costs and managing changes to the cost baseline. Primarily Concern with cost variance Any increase to the authorized budget can only be approved through the Perform Integrated Change Control process Control Cost - ITTO OUTPUTS 1.Work Performance Information 2.Cost Forecasts TOOLS & TECHNIQUES 3.Change Requests INPUTS 4.Project Management Plan 1.Expert Judgment Updates 1.Project Management Plan 2.Data Analysis Project Documents Updates a.Cost Management Plan Earned Value Management b.Cost Baseline Variance Analysis c.Performance Measurement Baseline Trend Analysis 2.Project Documents Reserve Analysis a.Lessons Learned Register To-Complete Performance Index 3.Project Funding Requirements Project Management Information 4.Work Performance Data System 5.Organizational Process Assets Control Costs - Inputs Project Management Plan Cost Management Plan Cost Baseline Performance Measurement Baseline Project Documents Lessons Learned Register Project Funding requirements Work Performance Data Organizational Process Assets Control Costs - Tools Expert Judgement Data Analysis(Formulas to be covered in EVM Section) Earned Value Analysis Variance Analysis Trend Analysis Reserve Analysis To-Complete Performance Index (TCPI) Formula to be covered in EVM Section. PMIS Control Costs Continue - Outputs Work Performance Information Costs Forecasts Uses the EAC (Estimate at Completion) EVM formula. Change requests Project Management plan updates Project Document Updates Control Costs Continue Performance Reviews Comparing cost performance over time, schedule activities or work packages Variance Analysis, compares actual project performance to planned or expected performance Trend Analysis, examines project performance over time to see if work levels are improving or deteriorating Earned Value Performance, Schedule and cost baselines compared to actual run rates Control Costs Continue Earned Value Analysis continues Planned Value, the budget assigned to the activity, or work package that needs to be completed at a set date and time Earned Value, the value of the budget assigned to the activity or work package that was completed at a set date and time Actual Cost, the actual spend rate of the activity or work package that was completed at a set date and time Schedule Variance, the scheduled difference between the earned value minus the planned value Cost Variance, the cost difference between the earned value minus the actual costs Schedule Performance Index, the measurement of progress achieved compared to what was planned progress Cost Performance index, the measurement of the value of work completed compared to the actual cost made on the project Earned Value Management Formulas BAC = Total Budget Cost for the project PV = Planned % Complete X BAC EV = Actual % X BAC AC = Sum of the cost for the given period CV = EV - AC CPI = EV / AC SV = EV - PV SPI = EV / PV EAC = BAC / CPI ETC = EAC - AC VAC = BAC - EAC TCPI=(BAC-EV)/(EAC-AC) for Forecast TCPI=(BAC-EV)/(BAC-AC) for remaining funds
