Chapter 7 Flashcards
includes processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed with in the approved budge.
Project Cost Management
defines how the project costs be estimated, budgeted, managed, monitored, and controlled.
Plan cost managment
develop an approximation of monetary resources needed to complete project work.
Estimate costs
process of aggregating the estimated costs of individual activities or work packages to establish an authorized budget
Determine budget
monitor status of project to update the costs and manage changes to the cost baseline
control costs
extension to the theory and practice of EVM. Replaces schedule theory variance measures used in traditional EVM (Earned Value-Planned Value) with ES and actual time (AT)
ES- Earned Schedule
alternate equation for calculating the schedule variance
ES- AT
ES greater than 0 the project is ahead of schedule.
Scheduled performance index formula that indicates efficiency with the work being scheduled
ES/AT
Plan cost management input that preapprove the financial resources and project approval requirements
Project charter
describes how the project will be planned, structured and controlled.
Cost management plan
degree which cost estimates will be rounded up or down base on scope of activities and magnitude of the project
Level of precision
the work breakdown structure (WBS) provides the framework for the cost management plan allowing for consistency with the estimates/budgets/and control costs
Organizational procedure links
WBS component used for project cost accounting. each account assigned a unique code or account number(s) that links directly to the performing organizations accounting system.
Control account
variance thresholds used for monitory may specify the agreed upon amount of variation, allowed before action needs to be taken.
*expressed as a percentage of deviation from the baseline
Control Threshold.
types/quantity to each work package/activity
Resource requirements
Rough order of magnitude (ROM)
Start-up phase (-25% to +75%)
uses values, or attributes of previous projects that are similar to current projects
- Attributes: scope, cost, budget, duration, and measures of scale (weight/Size)
Analogous Estimating
using statistical relationships between historical data and other variables to calculate costs.
- higher level of accuracy depending on model data sophistication
- estimates applied to total project or segments in conjunction with other estimating methods.
Parametric Estimating
method of estimating component of work
- estimating individual work packages or activities to the highest specified detail.
- Detail cost is summarized or “Rolled-up” to higher levels for reporting/tracking purposes’-
- accuracy influenced by the size of the activity.
Bottom-up estimating
defines an approximate range for activity cost
Three point estimating:
Most likely (cM)
Optimistic (cO)
Pessimistic (cP)
Expected cost, cE
triangular distribution formula
cE= (cO +cM + CP)/3
Beta distribution formula
cE= (cO+4 cM + cP)/6
amount of additional details supporting the cost estimates
- clear and complete on how cost estimates were derived.
basis of estimates
process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.
Determine budget
approved version of the time-phase project budget, excluding management reserves, which can be changed only through formal change control procedures.
Cost Baseline
- summation of control accounts
- made up by estimates tied directly to schedule activity
- represented in S-curve for time phase view
- EVM is a type.
Cost Baseline
cost baseline referred to as performance measurement baseline
added to cost baseline to produce the budget. Change warrant process to move fund from reserves to baseline
Management reserves
1) Management reserves - Cost _________
2) Contingency reserves- _____ ______estimates
3) Activity Contingency Reserves- _______ _______ estimates
1) Cost baseline
2) work package
3) activity cost
Total project funding requirements and periodic funding requirements are derived from
cost baseline.
cost baseline + management reserves
Total funds
process of monitoring the status of the project to update costs and manage changes to the cost baseline.
Control costs
KEY to effective cost control
management approved cost baseline
describes how the project costs will be managed and controlled
cost management plan
compared with the actual results determine a change, corrective action, or preventive action necessary
cost baseline
data on project status as costs have been authorized, incurred, invoiced, and paid
work performance data
compares performance measurement baseline to the actual schedule and cost performance
earned value analysis (EVA)
integrated to form the performance measurement baseline
scope baseline integrated with cost baseline and schedule baseline
measure of work performed expressed in terms of budget authorized for that work that has been completed
Earned Value (EV)
the realized cost incurred to work performance on an activity during a specific time period and needs to correspond in def to what was budgeted in the PV and measure in the EV (direct hours only, direct costs only, or all costs including direct costs)
Actual Cost (AC)
the explanation (cause, impact, and corrective action) for cost (CV= EV-AC), schedule (SV= EV-PV), and variance at completion (VAC= BAC - EAC) variances.
Variance analysis EVM
a measure of schedule performance expressed as the difference between earned value and planned value. Amount project is ahead/behind on planned delivery day.
Schedule Variance (SV)
SV= EV-PV
Schedule Variance
EV schedule variance = 0 means:
Project completed
Amount of budget deficit or surplus as a given point in time, EV-AC (Earned value-actual costs).
*Indicates relationship of physical performance to cost spent.
Cost variance (CV)
BAC- AC
Cost variance at the end of the project
A measure of schedule efficiency expressed as EV/PV
Schedule performance index (SPI)
SPI Value
Less than 1.0- less work completed than planned
Greater than 1.0- more work was completed than planned.
a measure of efficiency of a budgeted resource, expressed as a ratio of earned value to actual cost. EV/AC
Cost performance index (CPI)
graphical analysis technique comparing current state to future state goals in the form of BAC versus estimated at completion (EAC) and completion dates
trend analysis
Most common ETC forecast approach
manual, button-up summation by the PM and project team.
EAC= AC + Bottom-up ETC
EAC- Estimate at completion
ETC- Estimate to complete
common forecast methods
- EAC forecast for ETC work performed at budgeted rate
EAC= AC + (BAC - EV)
Common forecast method:
EAC forecast for ETC work performed at present CPI- Same cumulative cost performance index
EAC= BAC/CPI
Common forecast method:
EAC forecast for ETC work considered both SPI and CPI factors
- Considers both cost and schedule performance indices
- Used when project schedule impacts ETC effort
- Weight the CPI and SPI at different values (80/20, 50/50)
- EAC= AC + [(BAC-EV)/(CPI x SPI)]
used to monitor the status of contingency and the management reserve for the project to determine if these reserves are still needed or if additional reserves need to be requested.
Reserve analysis
a measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specific management goal, expressed as a ratio of the costs to finish the outstanding work. expressed as the BAC or EAC.
To-Complete Performance index (TCPI)
