7 - Project Cost Management Flashcards
What are the Project Cost Management processes?
- 1 Plan Cost Management—The process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.
- 2 Estimate Costs—The process of developing an approximation of the monetary resources needed to complete project work.
- 3 Determine Budget—The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.
- 4 Control Costs—The process of monitoring the status of the project to update the project costs and manage changes to the cost baseline.
What is the Project Cost Management process group?
Project Cost Management 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. The Project Cost Management processes are:
What are the tailoring considerations for Project Cost Management processes?
- Knowledge management.
Does the organization have a formal knowledge management and financial database repository that a project manager is required to use and that is readily accessible? - Estimating and budgeting.
Does the organization have existing formal or informal cost estimating and budgeting-related policies, procedures, and guidelines? - Earned value management.
Does the organization use earned value management in managing projects? u u use of agile approach. Does the organization use agile methodologies in managing projects? How does this impact cost estimating? - Governance.
Does the organization have formal or informal audit and governance policies, procedures, and guidelines?
What are the trends and emerging practices in the Project Cost Management process group?
- Earned Value Management (EVM)
EVM = Earned Value - Planned Value - Earned Schedule (ES)
ES - AT (Earned Schedule - Actual Time)
7.1
what is the Plan Cost Management process?
Plan Cost Management is the process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.
The goal is to create a cost management plan (which is this process’ output!)
7.1
What is the key benefit to the Plan Cost Management process?
The key benefit of this process is that it provides guidance and direction on how the project costs will be managed throughout the project.
7.1
Plan Cost Management: Inputs
.1 Project charter
.2 Project management plan
• Schedule management plan
• Risk management plan
.3 Enterprise environmental factors (EEFs)
.4 Organizational process assets (OPAs)7.1
Plan Cost Management: Tools & Techniques
.1 Expert judgment
.2 Data analysis
• Alternative analysis
.3 Meetings
7.1
Plan Cost Management: Outputs
.1 Cost management plan
The cost management plan is a component of the project management plan and describes how the project costs will be planned, structured, and controlled. The cost management processes and their associated tools and techniques are documented in the cost management plan.
7.2
what is the Estimate Costs process?
Estimate Costs is the process of developing an approximation of the cost of resources needed to complete project work.
7.2
what is the key benefit of the Estimate Costs process?
The key benefit of this process is that it determines the monetary resources required for the project.
7.2
Estimate Costs: Inputs
.1 Project management plan
• Cost management plan
• Quality management plan
• Scope baseline
.2 Project documents
• Lessons learned register
• Project schedule
• Resource requirements
• Risk register
.3 Enterprise environmental factors (EEFs)
.4 Organizational process assets (OPAs)7.2
Estimate Costs: Tools & Techniques
.1 Expert judgment
.2 Analogous estimating
.3 Parametric estimating
.4 Bottom-up estimating
.5 Three-point estimating
.6 Data analysis
• Alternatives analysis
• Reserve analysis
• Cost of quality
.7 Project management information system
.8 Decision making
• Voting7.2
Estimate Costs: Outputs
1 Cost estimates
.2 Basis of estimates
.3 Project documents updates
• Assumption log
• Lessons learned register
• Risk registerConcept: Cost Estimate
A cost estimate is a quantitative assessment of the likely costs for resources required to complete the activity.
Concept: Analogous Estimating
Analogous cost estimating uses values, or attributes, of a previous project that are similar to the current project. Values and attributes of the projects may include but are not limited to: scope, cost, budget, duration, and measures of scale (e.g., size, weight). Comparison of these project values, or attributes, becomes the basis for estimating the same parameter or measurement for the current project.
Concept: Parametric Estimating
Parametric estimating uses a statistical relationship between relevant historical data and other variables (e.g., square footage in construction) to calculate a cost estimate for project work. This technique can produce higher levels of accuracy depending on the sophistication and underlying data built into the model. Parametric cost estimates can be applied to a total project or to segments of a project, in conjunction with other estimating methods.
Concept: Three-Point Estimating
The accuracy of single-point cost estimates may be improved by considering estimation uncertainty and risk and using three estimates to define an approximate range for an activity’s cost:
- Most likely (cM). The cost of the activity, based on realistic effort assessment for the required work and any predicted expenses. - Optimistic (cO). The cost based on analysis of the best-case scenario for the activity. - Pessimistic (cP). The cost based on analysis of the worst-case scenario for the activity.
Depending on the assumed distribution of values within the range of the three estimates, the expected cost, cE, can be calculated using a formula. Two commonly used formulas are triangular and beta distributions. The formulas are:
- Triangular distribution. cE = (cO + cM + cP) / 3 - Beta distribution. cE = (cO + 4cM + cP) / 6
Cost estimates based on three points with an assumed distribution provide an expected cost and clarify the range of uncertainty around the expected cost.
7.4
What is the Determine Budget process?
Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.
7.4
what is the key benefit of the Determine Budget process?
The key benefit of this process is that it determines the cost baseline against which project performance can be monitored and controlled.
7.4
Determine Budget: Inputs
.1 Project management plan
• Cost management plan
• Resource management plan
• Scope baseline
.2 Project documents
• Basis of estimates
• Cost estimates
• Project schedule
• Risk register
.3 Business documents
• Business case
• Benefits management plan
.4 Agreements
.5 Enterprise environmental factors
.6 Organizational process assets7.4
Determine Budget: Tools & Techniques
.1 Expert judgment
.2 Cost aggregation
.3 Data analysis
• Reserve analysis
.4 Historical information review
.5 Funding limit reconciliation
.6 Financing7.4
Determine Budget: Outputs
.1 Cost baseline
.2 Project funding requirements
.3 Project documents updates
• Cost estimates
• Project schedule
• Risk registerconcept: Project Budget vs. Cost Baseline
A project budget includes all the funds authorized to execute the project.
The cost baseline is the approved version of the time-phased project budget that includes contingency reserves but excludes any management reserves.
Management reserves (Section 7.3.2.3) are added to the cost baseline to produce the project budget. As changes warranting the use of management reserves arise, the change control process is used to obtain approval to move the applicable management reserve funds into the cost baseline.
