L3 - Cost Management System

Question 1

Purpose and objectives of Cost Management System

Answer 1

Ensure project completion within budget.
Cost of project resources.
Effects of project decisions on project cost and lifecycle cost.

Question 2

Processes of Cost Management System

Answer 2

Resource planning.
Cost estimating.
Cost budgeting.
Cost control.

Question 3

Cost Management System steps

Answer 3

Conceptual cost estimate.
Cost plan.
Project approval.
Cash flow.

Question 4

Resource planning and cost estimating

Answer 4

Identify, then estimate the cost of each resource.
Outcome = project cost plan.
Owner’s acceptance of the project cost plan = project budget.

Question 5

Inputs of Resource Planning and Cost Estimating

Answer 5

Design cost.
Labor cost.
Equipment cost.
material cost.
FFandE (furniture, fixtures and equipment).
Management cost.
Other cost.
WBS.
Scope of work.
Historical information.
Resource pool description.
Organizational policies.

Question 6

Project Feasibility Studies

Answer 6

Determination of capital costs to test the project’s business practicality.
Screening estimates = conceptual estimates.
Commercial vs public feasibility:
-Comemrcial
-Public - regulatory
-Public - non regulatory

Question 7

Cash Flow

Answer 7

projected rate at which the owner’s cash is expended.

Question 8

Items needed to develop a Cash Flow Schedule

Answer 8

Cash flow analysis.
Conceptual project schedule.
Conceptual estimate.

Question 9

Cash Flow Considerations

Answer 9

Time vs \$\$.
Typical S curve.
Straight line analysis vs Bell shape.
Front-end loaded / back-end loaded.
Equipment buy out / installation

Question 10

Cost model for monitoring costs

Answer 10

Monitoring / Reporting on costs variances.
Cash flow.
Cost-trending (estimate at completion).

Question 11

Impact of external economic factors

Answer 11

Time to market.
Taxation laws.
Funding restrictions.
Advance commitments by owner.
ROI.
Calendar restrictions.

Question 12

Method of project funding

Answer 12

Typically the owner’s responsibility.

CM’s role: cost management plan, feasibility study, ROI calculation.

Question 13

Impact of project funding method on cost and schedule

Answer 13

Government grant funding.
Construction financing vs permanent financing.
Expiration and land options.

Question 14

Cost Management System summary

Answer 14

Help establish and manage the project budget.
Provide the tools necessary to manage and monitor budget:
-Feasibility studies.
-Cash flow studies.
-Cost models.
Helps ensure the project is delivered within budget.
Helps to manage the budget from inception to completion.