Project Cost Management

Project Cost Management

1. Develop Cost Management Plan

   • It provides guidance and direction on how the project costs will be managed throughout the project
   • Key Deliverable
     • Cost Management Plan
       • Describes how the Project costs will be
         • planned
         • structured
         • controlled

2. Cost Estimating

   • It determines the amount of cost required to complete project work
   • Key Deliverables
     • Activity Cost Estimates
       • Are quantitative assessments of likely costs required to complete project work
     • Basis for Estimates
       • how the cost estimate was derived
   • Tools & Techniques
     • Analogous Estimating
     • Parametric Estimating
     • Bottom-Up estimating
     • Three Point Estimating (PERT)
     • Reserve Analysis
     • Cost of Quality
     • Project Management Software
     • Vendor Bid Analysis
     • Group Decision-Making Techniques

3. Cost Budgeting

   • Process of aggregating the estimated costs of work packages to establish an authorized cost baseline
   • Key Deliverables
     • Cost Baseline
       • Approved version of the time-phased project budget
     • Project Funding Req.
       • The total funds required are those included in the cost baseline, plus management reserves, if any.
   • Tools & Techniques
     • Cost Aggregation
     • Reserve Analysis
     • Expert judgement
     • Historical relationships
     • Funding Limit Reconciliation

4. Cost Control

   • It provides the means to recognize variance from the plan in order to take corrective action and minimize risk
   • Main Tools & Techniques
     • Earned Value Management (EVM)
       • Planned Value (PV)
       • Earned Value (EV)
       • Actual Cost (AC)
       • EVM – Variances
         • Schedule Variance: SV = EV – PV
         • Cost Variance: CV = EV – AC
       • EVM – Performance indexes
         • Schedule Performance Index: SPI = EV / PV
         • Cost Performance Index: CPI = EV / AC
   • Key Deliverables
     • Work Performance Info.
       • Are documented and communicated to stakeholders.
     • Cost Forecasts
       • The calculated or ascending EAC value should be documented and communicated to stakeholders