Project Cost Management Flashcards
Project Cost Management
Includes processes involved in planning, estimating, budgeting, financing, funding, managing and controlling costs so that the project can be completed within the approved budget
budget
spreads cost over time, allocating funds to the resources needed to have the project meet its schedule
contingency reserve
costs of the response solutions from known project risks
cost baseline
the approved version of the time phased project budget, excluding any management reserves; basis for comparison to actual results; only changed through change control process; includes contingency reserves
Cost Management Tailoring Considerations (5)
- knowledge management
- estimating an budgeting
- earned value management (EVM)
- agile methodologies
- governance
Cost Management Trends and Practices
- earned value management
2. earned schedule
Earned Value Management (EVM)
methodology that combines scope, schedule and resource measurements to assess project performance and progress against the project baseline
SV = EV - PV (schedule variance = earned value - planned value)
best technique for controlling costs
Earned Schedule (ES)
TV = ES - AT (time variance = earned schedule - actual time)
If TV is positive the project is ahead of schedule, if negative it is behind schedule
Plan Cost Management
planning ahead for how costs are estimated, allocated, and controlled
cost management plan
documents cost management processes; defines how the project costs will be estimated, budgeted, managed, monitored, and controlled; may establish: units of measure, level of precision, level of accuracy, procedures; thresholds; reporting formats
Estimate Costs
sets the stage for the budget and allows you to consider the features and details of project activity; develop an approximation of the cost of resources needed to complete project work; include input from subject matter experts (SMEs)
cost estimate
a quantitative assessment or prediction of the likely costs of resources required to complete work (labor, materials, equipment, services, facilities); include contingency reserve; included basis for estimate and assumed accuracy
progressive elaboration
as the project progresses, the scope will become clearer and estimates will become more accurate
Rough Order of Magnitude (ROM)
estimate of the costs provided in the early stages of a project when scope and requirements not fully defined
analogous cost estimate
uses historical data from a similar activity to compare current work to previous similar work; ratio of current work to previous work is multiplied by previous cost
parametric estimating
uses statistical relationship between historical data and other variables to calculate a cost estimate
bottom-up estimating
takes detailed estimates at the work package level to determine the most accurate estimate
three point estimating
used to account for uncertainty in the cost estimate
(estimate, optimistic, most likely, pessimistic)
cE = (cO + cM + cP) / 3
cE = (cO + 4cM + cP) / 6 —> beta distribution equation
Determine Budget
aggregate estimated costs of individual activities or work packages to establish an authorized cost baseline
project budget
includes all of the funds authorized to execute the project
Control Costs
monitor the budget to look for variances from the approved cost baseline; requires knowledge of actual costs spent to date and analyzing the relationship between the consumption of funds to the work being required; isolate and understand variances from approved cost baseline; preventing unapproved changes; informing stakeholders
work performance information
information on how the project work is performing compared to the cost baseline
budget at completion (BAC)
total budget allocated to the project
estimate at completion (EAC)
expected total cost of completing all work expressed
EAC = AC + ETC (actual cost + estimate to complete)
