Ch 7 Project Cost Management Flashcards
Variance Analysis
Method of determining if there is a variance between the planned work (Project Management Plan) and the actual work (work performance data)
If so, a change may need to be requested to fix the project budget
A tool used to help execute the Control Costs process (Cost/M&C)
Project Cost Management
Knowledge area regarding the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget
Value Engineering (or Value Analysis)
A method of finding a less costly way of completing the project
Direct Cost
A cost directly attributed to completing the project, such as for materials, equipment rentals, or project team wages
A cost that will be included in the cost baseline
Budget Estimate
A cost estimate that is better than ROM (-10% to +25%) and is usually done in the earlier parts of planning a phase or project
A type of estimate that can be used to execute the Estimate Costs process (Cost/Planning)
Cost of Quality
The amount of money spent to ensure quality requirements are met on a project (e.g., the cost of better machinery, more trained workers, or better materials)
If quality requirements are not met on a project, completed work may need to be discarded and/or defects may need to be fixed
An important data analysis concept used to help execute the Estimate Costs process (Cost/Planning)
A data analysis tool used to help execute the Plan Quality Management process (Quality/Planning)
Actual Cost (AC)
The amount of money that has been spent on the project
Indirect Cost
A cost that is not included in the project budget, such as the sponsor’s time spent helping the PM or printer paper
Earned Value (EV)
The value of the work actually done on the project
EV = BAC x Actual % Complete
Earned Value Analysis/Management (EVM)
A series of schedule- and cost-related formulas and calculations that provide important statistics about the performance of the project
BAC, EV, PV, AC, CV, CPI, SV, SPI, EAC, ETC
A tool used to hep execute the Control Costs process (Cost/M&C)
Cost Performance Index (CPI)
A measure of the financial effectiveness and efficiency of a project; it represents the amount of completed work for every unit of cost spent
CPI = EV / AC
Definitive Estimate
The most accurate cost estimate (-5% to +10%) that is usually done in the later parts of planning a phase or project
A type of estimate that can be used to execute the Estimate Costs process (Cost/Planning)
Schedule Variance (SV)
The difference between the work done and the amount that should be done
SV = EV - PV
Positive values are good (ahead of schedule)
Negative values are bad (behind schedule)
Cost Variance (CV)
The difference between the work done and money spent
CV = EV - AC
Positive values are good (under budget)
Negative values are bad (over budget)
Management Reserves
The amount of money that is not included in the cost baseline and is added to the project by senior management to manage “unknown unknowns”; the project will need an approved change request to access these funds
An important reserve analysis concept for the Estimate Costs process (Cost/Planning)
Cost Management Plan
The management plan that will direct how to estimate the cost of each activity, create the project budget, and monitor and control the cost of the project
It will also determine the level of estimate accuracy and how the EVM will be used to control the cost
An output of the Plan Cost Management process (Cost/Planning)
An input to the Develop Project Management Plan process (Integration/Planning)
Estimate Costs
The process of developing an approximation of the monetary resources needed to complete the project work; analyzing each individual activity and assigning cost to each activity
Almost all the other knowledge areas will affect cost in one way or another; scope, schedule, quality, risk, resources, and procurement (not integration or communication) will affect the cost of the activities
Knowledge Area: Cost
Process Group: Planning
Inputs:
- Risk Register
- Resource Requirements
Tools:
- Analogous Estimating
- Parametric Estimating
- Three-Point Estimating
- Bottom-Up Estimating
- Data Analysis
- Reserve Analysis
- Cost of Quality
Outputs:
- Cost Estimates
Reserve Analysis
A technique used to reserve either time or funds to manage project-related risks
A tool used to help execute the Estimate Costs process (Cost/Planning)
Cost Aggregation
Sunk Cost
The amount of money that has already been spent on the project
Determine Budget
The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline
Knowledge Area: Cost
Process Group: Planning
Inputs:
- Activity Cost Estimates
- Risk Register
Tools:
- Cost Aggregation
Outputs:
- Cost Baseline
Variable Cost
A cost that will change as the project progresses, such as gas prices or airline tickets
Planned Value (PV)
The value of the work that should have been done on the project
PV = BAC x Planned % Complete
Cost Estimates
The cost of each individual activity, including labor, materials, equipment, technology, exchange rate, reserve, and inflation
An output of the Estimate Costs process (Cost/Planning)
An input of the:
- Determine Budget process (Cost/Planning)
- Estimate Activity Resources process (Resource/Planning)
