Cost Management Ch 7 Flashcards
When is the ability to influence costs greatest in a project?
the beginning
What processes are involved in Cost Management?
Plan Cost Management
Estimate Cost
Determine Budget
Control Costs
What is Earned Value Management (EVM)?
Assesses “how are we doing now” and predicts “how will we do in future”
Uses scope baseline, cost baseline and schedule baseline to form performance measurement baseline
- PV
- EV
- AC
What is Planned Value (PV)?
authorized budget assigned to work to be accomplished for an activity or WBS component.
What is Budget At Completed (BAC)?
Total of planned value for project
-adding up the planned value for all of the activities
What is Actual Cost (AC)?
Actual Cost is the total cost incurred for the actual work completed to date
What is Earned Value (EV)?
Earned Value is the value of the work actually completed to date
Define: Plan Cost Management (7.1)
establishes the framework/policies/procedures for how to estimate and manage costs
The key benefit of this process is that it provides guidance and direction on how costs are managed from project initiation to closure
What does the Cost Management Plan cover?
Units of measure
Level of precision
Level of accuracy
Control thresholds
Reporting formats
Organizational procedures links
Rules of performance measurement
Inputs: Plan Cost Management
Project Charter
Project Management Plan:
- schedule management plan
- risk management plan
EEFs
OPAs
Tools/Techniques: Plan Cost Management
Expert Judgement
Data Analysis (alternatives analysis)
Meetings
What are the some ways to fund a project?
self funding
funding with equity (share in exchange for cash investment)
funding with debt (when a company raises money for spending by selling debt)
Outputs: Plan Cost Management
Cost Management Plan
What is a Control Threshold?
Variance thresholds for monitoring cost performance may be specified to indicate an agreed-upon amount of allowed variation
Define: Estimate Costs (7.2)
Process of developing estimates for resources
Key benefit: outlines the $ needed
Inputs: Estimate Costs
Project Management Plan
Project Documents
EEFs
OPAs
What are the important components of the Project Management Plan for Estimate Costs?
Cost Management Plan
Quality Management Plan
Scope Baseline
Why is the Quality Management Plan important?
outlines resources needed to achieve quality
What goes into a Scope Baseline?
Project scope statement: (includes funding constraints for the project)
WBS: (provides relationships among all of the project deliverables)
WBS dictionary
Tools/Techniques: Estimate Costs
Expert Judgement
Analogous Estimating
Parametric Estimating
Bottom-up Estimating
3 Point Estimating
Data Analysis (alternatives, reserve and cost of quality)
Project Management Information System (PMIS)
Decision Making
What is Reserve Analysis?
Accounts for cost uncertainty/identified risks. Viewed as a part of the budget to account for unknowns
Outputs: Estimate Costs
Cost Estimates
Basis of Estimates
Project Document UPDATES (assumption log, lessons learned register and risk register)
What do you need to consider while estimating costs?
Basis of estimation
assumptions
constraints
range of possible estimates
confidence level of estimate
What are Variable Costs?
Costs that change with amount of production/work
E.G. cost of materials, supplies and wages
What are Direct Costs?
Costs that are directly attributed to the project work
E.G. team travel, team wages, cost of material used on project
What are Indirect Costs?
Items/costs that can benefit more than one project
E.G. fringe benefits, taxes
Define: Determine Budget (7.3)
Process of aggregating the estimated costs of individual activities or work packages to create a authorized cost baseline
Key Benefit: determines the cost baseline against which project performance can be controlled and monitored
What is a Cost Baseline?
Approved budget, excluding management reserves which can only be changed through formal change control procedures
Inputs: Determine Budget
Project Management Plan (cost management plan, resource management plan and scope baseline)
Project Documents (basis of estimates, cost estimates, project schedule, risk register)
Business Documents (business case and benefits management plan)
Agreement
EEFs
OPAs
What is the importance of reviewing the Business Case?
Identifies the critical success factors for the project including financial success factors
Why is the Benefits Management Plan important at this stage?
Includes target benefits (NOV calculations), timeframe for realizing benefits and metrics associated with benefits
Tools/Techniques: Determine Budget:
Expert Judgement
Cost Aggregation
Data Analysis (management reserves)
Historical Information Review
Funding Limit Reconciliation
Financing
What is Cost Aggregation?
Total cost estimate for the work packages within all levels of the WBS
Outputs: Determine Budget
Cost Baseline
Project Funding Requirements
Project Document UPDATES (cost estimate, project schedule and risk register)
What do Project Funding Requirements include?
total funding and periodic funding (annually, quarterly, etc)
cost baseline plus management reserves
Define: Control Costs (7.4)
Process of monitoring the status of the project to update project costs and managing changes to the cost baseline
Key benefit: cost baseline is maintained
Inputs: Control Costs
Project Management Plan (cost management plan, cost baseline, performance measurement baseline)
Project Documents
Project Funding Requirements
Work Performance Data
OPAs
When is Performance Measurement Baseline used?
when using earned value analysis, the performance measurement baseline is compared to actual results to determine if a change, corrective action or preventative action is needed
Tools/Techniques: Control Costs
Expert Judgment
Data Analysis: EVA, Variance analysis, Trend analysis, Reserve analysis
To Complete Performance Index (TCPI)
Project Management Information Systems (PMIS)
What is Schedule Variance (SV)? How is it calculated?
Amount by which project is ahead or behind schedule
SV = EV - PV
What is Cost Variance (CV)? How is it calculated?
Amount that budget is above or below allocated amount at a given time
CV = EV - AC
What is Schedule Performance Index (SPI)? How is it calculated?
Measures how efficiently the project team is accomplishing the work
Used in conjunction with CPI to forecast final project completion estimates
SPI = EV / PV
What does an SPI above 1.0 indicate?
Project is ahead of schedule
What is a Cost Performance Index (CPI)? How is it calculated?
Measure of cost efficiency of budgeted resources
CPI = EV / AC
What does a CPI less than 1.0 indicate?
Project is over budget
What is Estimate at Completion (EAC)?
Expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete
What is Estimate to Complete (ETC)?
Assuming work is proceeding on plan the cost of completing the remaining authorized work can be calculated using
ETC = EAC - AC
What is To-Complete Performance Index (TCPI)?
Measure of cost performance that must be met with the remaining resources so to meet the goal within budget
TCPI = (BAC-EV)/(BAC-AC)
What does a TCPI greater than 1.0 indicate?
harder to complete
What is a TCPI of 1.0 indicate?
same to complete
Outputs: Control Costs
Work Performance Information
Cost Forecasts
Change Requests
Project Management Plan UPDATES
Project Document UPDATES
