Chapter 7 - Cost Mgmt Flashcards
What is the difference between the budget and the cost baseline?
The cost baseline is the approved version of the time-phased project budget, excluding any management reserves (used for unforeseen work within the scope of the project - “unknown unknowns”). When an amount of management reserves is used, it is added to the cost baseline, requiring an approved change.
What are project funding requirements? Describe what total and periodic funding requirements are.
Total funds included in the cost baseline and the management reserves, and can include the sources of funding.
Periodic funding requirements show what is required for a particular period, e.g. quarterly, annually
What is earned value analysis?
Earned value analysis compares the performance measurement baseline to the actual schedule and cost performance
What are the three key dimensions of earned value management?
Planned value: authorised budget assigned to scheduled work. At a given point in time, planned value defines the work that should have been accomplished
Earned value: measure of work performed expressed in terms of the budget authorised for that work
Actual cost: realised cost incurred for the work performed on an activity during a specific time period.
What is a management reserve and what is a contingency reserve?
Management reserve: An amount of the project budget or project schedule that is held outside of the performance measurement baseline for management control purposes, that is reserved for unforeseen work that is within the scope of the project
Contingency reserve: Time or money allocated in the schedule or cost baseline for known risks with active response strategies
What is life cycle costing?
This concept involves looking at costs over the entire life of the product, not just the cost of the project to create the product. For example, maintenance cost after the product has been created
What is the value analysis? Also known as value engineering
Finding a less costly way to do the same work, finding ways to provide the required features at the lowest overall cost without loss of performance
What is a cost risk?
Cost related risk, i.e. the risk that costs on the project might be higher than budgeted
What are indirect costs?
Costs not directly attributable to any one project such as overhead costs
What are direct costs?
Those costs directly attributable to the project
What are control thresholds?
The amount of variations in cost allowed before you need to take action
What costs should you estimate?
– Costs directly associated with the project, such as labour, equipment, materials
– cost of quality efforts
– cost of risk efforts
– cost of the project managers time
– cost of project management activities
– expenses for physical office spaces used directly for the project
– overhead costs
-When the project involves a procurement: estimate the amount of profit you are paying the seller when purchasing goods or services
What are the inputs to estimating costs?
– Cost management plan
– quality management plan
– scope baseline
– lessons learned register
– project schedule
– resource requirements
– risk register
– organisational process assets such as templates and historical information
– Enterprise environmental factors such as marketplace conditions exchange rates and possible costs of suppliers
– project management costs i.e. the costs to manage the project
What kind of estimate ranges are there?
– Rough order of magnitude (ROM) estimate: -25 to +75%
– budget estimate: -10 to +25%
– definitive estimate: -5 to +10%
Estimates become more detailed as project planning progresses.
Even the approved baseline may be expressed as an estimate
Describe the eight step process to creating a budget
- Activity estimates
- Work package estimates
- Control account estimates
- Project estimates
- Contingency reserves
- Cost baseline
- Management reserves
- Cost budget
