7. PROJECT COST MANAGEMENT

7. PROJECT COST MANAGEMENT

1. 7.1 Plan Cost Management

   • This defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.
   • .1 Inputs
     • .1 Project charter
     • .2 Project management plan
     • .3 Enterprise environmental factors
     • .4 Organizational process assets
   • .2 Tools & Techniques
     • .1 Expert judgment
     • .2 Data analysis
       • Alternatives analysis
         • can include reviewing strategic funding options, consideration of ways to acquire project resources such as making, purchasing, renting, or leasing.
     • .3 Meetings
   • .3 Outputs
     • .1 Cost management plan
       • Describes how the project costs will be planned, structured, and controlled
       • Units of measure
         • such as staff hours, staff days, or weeks for time measures; meters, liters, tons, kilometers, etc for each of the resources.
       • Level of precision
         • (e.g., US$995.59 to US$1,000)
       • Level of accuracy
         • The acceptable range (e.g., ±10%)
       • Organizational procedures links.
         • provides the framework for the cost management plan
       • Control thresholds
         • For monitoring cost performance
       • Rules of performance measurement.
       • Reporting formats.
       • Additional details

2. 7.2 Estimate Costs

   • This developing an approximation of the monetary resources needed to complete project work.
   • .1 Inputs
     • .1 Project management plan
       • Cost management plan
         • Describes estimating methods that can be used and the level of precision and accuracy required for the cost estimate.
       • Quality management plan
         • Describes the activities and resources necessary for the project management team
       • Scope baseline
         • Includes the project scope statement, WBS, and WBS dictionary:
     • .2 Project documents
       • Lessons learned register
         • To improve the accuracy and precision of the cost estimates.
       • Project schedule
         • Includes the type, quantity, and amount of time that team and physical resources will be active on the project
       • Resources requirements
         • Identify the types and quantities of resources required for each work package or activity.
       • Risk register
         • Provides detailed information that can be used to estimate costs
     • .3 Enterprise environmental factors
       • Include are Market conditions, Published commercial information, Exchange rates and inflation.
     • .4 Organizational process assets
   • .2 Tools & Techniques
     • .1 Expert judgment
     • 2 Analogous estimating
       • Using for estimating the duration or cost of an activity or a project using historical data from a similar activity or project.
       • Is generally less costly and less time-consuming than other techniques, it is also less accurate
     • .3 Parametric estimating
       • Uses a statistical relationship between historical data and other variables
     • .4 Three-point estimating
       • Most likely (tM), Optimistic (tO) and Pessimistic (tP).
     • .5 Bottom-up estimating
       • Is a method of estimating project duration or cost by aggregating the estimates of the lower level components of the WBS.
     • .6 Data analysis
       • Alternatives analysis
         • Used to compare various levels of resource capability or skills; scheduling compression techniques
       • Reserve analysis
         • Contingency reserves are the estimated duration within the schedule baseline, which is allocated for identified risks that are accepted, are associated with the known-unknowns
         • Management reserves are a specified amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within the scope of the project; also is not included in the schedule baseline.
     • .7 Decision making
     • .8 Meetings
   • .3 Outputs
     • .1 Duration estimates
       • Are quantitative assessments of the likely number of time periods that are required to complete an activity, a phase, or a project. Example: A range of 2 weeks ± 2 days, 15% probability of exceeding 3 weeks
     • .2 Basis of estimates
     • .3 Project documents updates
       • Activity attributes
       • Assumption log
       • Lessons learned register

3. 7.3 Determine Budget

   • This aggregating the estimated costs of individual activities or work packages
   • .1 Inputs
     • .1 Project management plan
       • Cost Mabagement Plan
         • Describes how the project costs will be structured into the project budget.
       • Resource management plan
         • Provides information on rates, estimation of travel costs, and other foreseen costs.
       • Scope baseline
         • Includes the project scope statement, WBS, and WBS dictionary details for cost estimation and management
     • .2 Project documents
     • .3 Business documents
       • Business case
         • Identifies the critical success factors for the project, including financia success factors.
       • Benefits management plan
         • Includes the target benefits, such as net present value calculations, timeframe for realizing benefits, and the metrics associated with the benefit
     • .4 Agreements
     • .5 Enterprise environmental factors
     • .6 Organizational process assets
   • .2 Tools & Techniques
     • .1 Expert judgment
     • .2 Cost aggregation
       • Are aggregated by work packages in accordance with the WBS, are then aggregated for the higher component levels of the WBS and, ultimately, for the entire project.
     • .3 Data analysis
       • * Management reserves are an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project. * Are intended to address the unknown unknowns that can affect a project. *Is not included in the cost baseline but is part of the overall project budget
     • .4 Historical information review
     • .5 Funding limit reconciliation
       • This is accomplished by placing imposed date constraints for work into the project schedule.
     • .6 Financing
       • Involves the acquisition of funds for projects
   • .3 Outputs
     • .1 Cost baseline
       • Is developed as a summation of the approved budgets for the different schedule activities, used as a basis for comparison to actual results.
     • .2 Project funding requirements
       • Are derived from the cost baseline.
     • .3 Project documents updates
       • Cost estimates
       • Project schedule
       • Risk register

4. 7.4 Control Costs

   • This monitoring the status of the project to update the project costs and managing changes to the cost baseline
   • .3 Outputs
     • .1 Work performance information
     • .2 Cost forecasts
     • .3 Change requests
     • .4 Project management plan updates
       • Cost baseline
       • Cost management plan
       • Performance measurement baseline
     • .5 Project documents updates
       • Assumption log
       • Basis of estimates
       • Cost estimates
       • Lessons learned register
       • Risk register
   • .2 Tools & Techniques
     • .1 Expert judgment
       • Include: Variance analysis, Earned value analysis, Forecasting, and Financial analysis
     • .2 Data analysis
       • Earned value analysis
         • Earned value analysis (EVA).
           • Compares the performance measurement baseline to the actual schedule and cost performance.
           • Planned value (PV)
             • It is the authorized budget planned for the work to be accomplished for an activity or work breakdown structure (WBS) component, not including management reserve.
             • is also known as budget at completion (BAC).
           • Earned value (EV)
             • It is the budget associated with the authorized work that has been completed.
             • Is used to calculate the percent complete of a project.
           • Actual cost (AC)
             • Is the realized cost incurred for the work performed on an activity during a specific time period
       • Variance analysis
         • Cost variance (CV = EV – AC),
           • Is the amount of budget deficit or surplus at a given point in time, it indicates the relationship of physical performance to the costs spent.
         • Schedule variance (SV = EV – PV),
           • Is a measure of schedule performance
           • It is the amount by which the project is ahead or behind the planned delivery date, at a given point in time.
         • Schedule performance index (SPI) = EV/PV.
           • Is a measure of schedule efficiency
           • An SPI value less than 1.0 indicates less work was completed than was planned..
           • An SPI greater than 1.0 indicates that more work was completed than was planned.
         • The cost performance index (CPI) = EV/AC.
           • Is a measure of the cost efficiency of budgeted resources
           • CPI value of less than 1.0 indicates a cost overrun for work completed.
           • A CPI value greater than 1.0 indicates a cost underrun of performance to date.
       • Trend analysis
         • Examines project performance over time to determine if performance is improving or deteriorating.
         • Charts.
           • In earned value analysis, three parameters of planned value, earned value, and actual cost can be monitored and reported on both a period-by-period basis (typically weekly or monthly) and on a cumulative basis.
         • Forecasting
           • EAC forecasting approach is a manual, bottom-up summation by the project manager and project team.
       • Reserve analysis
     • .3 To-complete performance index
       • a measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specified management goal,
     • .4 Project management information system
   • 01 Inputs
     • .1 Project management plan
       • Cost management plan • Cost baseline • Performance measurement baseline
     • .2 Project documents
       • Lessons learned register
     • .3 Project funding requirements
       • Include projected expenditures plus anticipated liabilities.
     • .4 Work performance data
       • Contains data on project status such as which costs have been authorized, incurred, invoiced, and paid.
     • .5 Organizational process assets