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Cost Management


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estimate costs
process of developing approximation of monetary resources needed to complete the project activities
determine budget
process of aggregating estimated costs of individual activities or work packages to establish an authorized cost baseline
control costs
process of monitoring the status of the project to update the project budget and managing changes to the cost baseline
early stages
ability to influence cost is greatest at
cost management plan
establishes precision level, units of measure, org procedures links, control thresholds, earned value rules, reporting formats, process descriptions
estimate costs
inputs: scope baseline, project schedule, HR plan, risk register, EEF (market conditions, published commecial info), OPA (policies, historical info)
estimate costs
tools and techniques: expert judgement, analagous, parametric, bottom-up, three-point (PERT) estimates, reserve analysis, cost of qualit, PM estimating software, vendor bid analysis
analagous estimating
using the cost of one thing and comparing to another similar
parametric estimating
productivity X rate. amount of work multiplied by rate of productivity.
three-point estimating
PERT = (pessimistic + optimistic + 4x most likely) divided by 6
diminishing returns
"law of" x which says that putting more resources in to something yields less return; extra cost vs extra revenue
contingency reserves
money planned in as a buffer in to the budget; reduce risk of overruns while meeting objectives; available to you as the project manager
direct costs
costs tied directly to the project
management reserves
reserves kept for unknowns
depreciation
A reduction in the value of an asset with the passage of time; done as part of cost estimates in project
estimate costs
outputs: activity cost estimates (DL, material, equip, services, facilities, inflation, contingency reserve), basis of estimates (assumptions, constraints, range, confidence level), project document u
budget
total cost baseline
determine budget
inputs: activity cost estimates, basis of estimates, scope baseline, project schedule, resource calendars, contracts, OPA (existing policies, reporting methods)
determine budget
tools & techniques: cost aggregation, reserve analysis, expert judgement, historical relationships, (analagous data, parameters to predict), funding limit reconciliation
funding limit reconciliaiton
act of comparing and adjusting the funding limits and estimated costs by refining the scope, rescheduling the activities, etc.
determine budget
outputs: cost performance baseline, project funding requirements, project document updates (risk register, cost estimates, project schedule)
cost control
searches out causes of positive and negative variances, part of integrated change control
control costs
inputs: project management plan, project funding requirements, WPI (deliverable status, authorized or incurred costs, estimates for work completion), OPA
earned value
the way for you to determine the magnitude and cause of the variance and decide if it needs corrective action
planned value
what we planedn to spend on the scheduled activities?
total PV
performance measurement baseline (PMB) or budget at completion (BAC)
earned value
we completed x% of the work and that work is worth $x of budget costs
actual cost
total amount we spent on that WBS component or schedule activity
cost variance
= EV - AC
cost performance index
= EV / AC
earned value
= PV * % Complete
over budget
CV is negative
under budget
CV is positive
forecasting
a prediction or estimate of where the project will be in the near future, based on the information and knowledge available now
estimate to complete
how much more it will take to complete the project, activity or component
estimate to complete
= EAC - AC
budget at completion
how much it will cost in the end; total cumulative planned value at completion
control costs
outputs: work performance measurements, budget forecasts, OPA updates, change requests, PM plan updates (cost performance baseline, cost management plan), project document updates (cost estimates, bas