7. Project Cost Management Flashcards
Define the following knowledge area: Project Cost Management.
7.1 Understand the four project management processes in the project cost management knowledge area
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.
financial aspect of a project – development of strategy for how you will estimate and budget costs, obtaining the funds & monitoring & controlling the expenses throughout the project’s life cycle.
Overall goal of this step is to ensure you complete your project within the approved project’s budget
- 1 Plan Cost Management
- 2 Estimate Costs
- 3 Determine Budget
- 4 Control Costs
Define the following process: Plan Cost Management.
7.1 Understand the four project management processes in the project cost management knowledge area
(P) - Define how the project costs will be estimated, budgeted, managed, monitored, and controlled.
Benefit: guidance on how costs will be managed
- performed once
- PMBOK Guide, Sixth Edition, 7.1 - Plan Cost Management, p. 235*
Define the following process: Estimate Costs.
7.1 Understand the four project management processes in the project cost management knowledge area
(P) - The proccess of developing an approximation of the cost of resources needed to complete project work.
- Estimate costs of all resource costs
Benefit: Determines monetary resources needed for project
- Performed periodically
- PMBOK Guide, Sixth Edition, 7.2 - Estimate Costs, p. 240*
Define the following process: Determine Budget.
7.1 Understand the four project management processes in the project cost management knowledge area
(P) - The proccess of aggregating the estimated costs of individual actvities or work packages to establish an authorized cost baseline.
Benefit: Determines cost baseline → used to monitor and control performance
- performed once
- PMBOK Guide, Sixth Edition, 7.3 - Determine Budget, p. 248*
Define the following process: Control Costs.
7.1 Understand the four project management processes in the project cost management knowledge area
(MC) - Monitor the status and cost performance of the project to update the project costs and managing changes to the cost baseline. Monitor how resources are spent
cost performance vs cost baseline
Benefit: Cost baseline is maintained
- Performed throughout
- PMBOK Guide, Sixth Edition, 7.4 - Control Costs, p. 257*
Identify the inputs, tools, techniques, and outputs of the following process: Plan Cost Management.
7.2 Identify the input, tools, techniques, and outputs defined in the six processes in project cost management
Identify the inputs, tools, techniques, and outputs of the following process: Estimate Costs.
7.2 Identify the input, tools, techniques, and outputs defined in the six processes in project cost management
Identify the inputs, tools, techniques, and outputs of the following process: Determine Budget.
7.2 Identify the input, tools, techniques, and outputs defined in the six processes in project cost management
Identify the inputs, tools, techniques, and outputs of the following process: Control Costs.
7.2 Identify the input, tools, techniques, and outputs defined in the six processes in project cost management
Identify key concepts for Project Cost Management.
7.3 Identify key concepts in project cost management, including tailoring and special considerations for agile/adaptive environments
tl;dr
- ongoing use costs
- stakeholder expectations
- outsource performance analysis or nah
quotes
- [ongoing use costs] This knowledge area should also consider the effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting project deliverables.
- [stakeholder expectations] Different stakeholders will measure project costs in different ways and at different times. Stakeholder requirements for managing costs should be considered explicitly.
- [outsource performance analysis or nah] Predicting and analyzing the prospective financial performance of the project’s product may be performed outside the project, or it may be part of Project Cost Management.
PMBOK Guide, Sixth Edition, Appendix X4: X4.4 - Key Concepts for Project Cost Management, p. 674
Identify the tailoring considerations for Project Cost Management.
7.3 Identify key concepts in project cost management, including tailoring and special considerations for agile/adaptive environments
- Knowledge management. - past project histories, lessons learned
- Estimating and budgeting. Does the organization have existing formal or informal cost estimating and budgeted-related policies, procedures, and guidelines?
- Earned value management. Does the organization use earned value management in managing projects?
- 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?
PMBOK Guide, Sixth Edition, 7 - Project Cost Management, p. 234
Identify special consideration for agile/adaptive environments.
7.3 Identify key concepts in project cost management, including tailoring and special considerations for agile/adaptive environments
- Lightweight estimation methods can be used to generate a fast, high-level forecast or project labor csts, which can then be easily adjusted as changes arise.
- In cases where high-variability projects are also subject to strict budgets, the scope and schedule are more often adjusted to stay within cost constraints.
PMBOK Guide, Sixth Edition, 7 - Project Cost Management, p. 234
What is analogous cost estimating?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
Historical data from similar activity to compare current work to previous, similar work. Analogous cost estimating uses values, or attributes, of a previous project that are similar to the current project. Comparison of these project values, or attributes, becomes the basis for estimating the same parameter or measurement for the current project.
- High level of estimate
- PMBOK Guide, Sixth Edition, 7.2.2.2 - Analogous Estimating, p. 244*
What is parametric cost estimating?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
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.
- higher level of accuracy (depending on details)
- PMBOK Guide, Sixth Edition, 7.2.2.3 - Parametric Estimating, p. 244*
What is bottom-up cost estimating?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The cost of individual work packages or activities is estimated to the greatest level of specified detail. The detailed cost is then summarized or “rolled up” to higher levels for subsequent reporting and tracking purposes.
PMBOK Guide, Sixth Edition, 7.2.2.4 - Bottom-Up Estimating, p. 244
What is variance at completion?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is to complete performance index?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
A measure of the cost performance that must be achieved with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstanding work to the budget available.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is schedule variance?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The amount by which the project is ahead or behind the planned delivery date, at a given point in time, expressed as the difference between the earned value and the planned value.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is schedule performance index?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
A measure of schedule efficiency expressed as the ratio of earned value to planned value.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is planned value?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The authorized budget assigned to scheduled work.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is estimate to complete?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The expected cost to finish all the remaining project work.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is estimate at completion?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The estimated total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is earned value?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The measure of work performed expressed in terms of the budget authorized for that work.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is cost variance?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The amount of budget deficit or surplus at the given point in time, expressed as the difference between the earned value and the actual cost.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is cost performance index?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
A measure of the cost efficiency of budgeted resources expressed as the ratio of earned value to actual cost.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is budget at completion?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The sum of all budgets established for the work to be performed.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
What is actual cost?
7.4 Understand and apply basic forecasting and earned value methods for project cost management
The realized cost incurred for the work performed on an activity during a specified time period.
PMBOK Guide, Sixth Edition, Table 7-1 - Earned Value Calculations Summary Table, p. 267
