Project Cost Management (II) - PMBOK
Plan cost management is the process that establishes the policies,procedures and documentation for planning, managing and controlling project costs.
Input:
Project Management plan (Scope baseline, Schedule baseline, Other information)
Project charter
Enterprise Environment factors
Organizational Process Assets
Tools and Techniques:
Expert judgment/Analytical Techniques (pay back period, return on investment, internal rate of return, discounted cash flow and net present value)/Meetings
Output:
Cost Management plan
Units of measure, Level of precision, Level of accuracy, Organizational procedure links, Control thresholds, Rules of performance measurement, Reporting formats, Process descriptions, Additional details
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Estimate Costs:
Estimate costs is the process of developing an approximation of the monetary resources needed to complete project activities. Amount of cost required to complete project work.
Project in the initiation phase may have a rough order of magnitude (ROM) estimate in the range of -25% to +75%. Later, more info is known, definitive estimates could narrow the range of accuracy to -5% to +10%.
Costs are estimated for labor, materials, equipment, services and facilities, as well as special categories such as inflation allowance, cost of financing, or contingency costs.
Inputs:
Cost Management plan/Human Resource management plan/Scope baseline (Project scope statement, WBS, WBS dictionary)/Project Schedule/Risk Register/Enterprise Environmental Factors/Organizational Process Assets
Tools and Techniques:
Expert judgment / Analogous Estimating / Parametric Estimating / Bottom-up Estimating / Three-point Estimating / Reserve Analysis (contingency reserves - "known-unknowns" & Management reserves - "unknown-unknowns") / Cost of Quality (COQ) / Project management software / Vendor bid analysis / Group Decision-making Techniques
Outputs:
Activity cost estimates / Basis of Estimates / Project document updates
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Determine Budget
Inputs:
Cost Management plan / Scope Baseline (Project Scope statement, WBS, WBS dictionary) / Activity Cost estimates / Basis of estimates / Project schedule / Resource calendars / Risk Register / Agreements / Organizational Process Assets
Tools and Techniques:
Cost Aggregation / Reserve Analysis / Expert judgment / Historical Relationships / Funding limit reconciliation
Outputs:
Cost Baseline / Project funding requirements / Project document updates
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Control Costs
Inputs:
Project Management plan (cost baseline, Cost management plan) / Project funding requirements / Work performance data / Organization process assets
Tools and Techniques:
Earned Value management is a methodology that combines scope, schedule and resource measurements to assess project performance and progress.
Planned Value (PV): authorized budget assigned to schedule work (not includes management reserve). The total planned value for the project is also known as budget at completion (BAC)
Earned Value (EV): is a measure of work performed expressed in terms of the budget authorized for that work. budget associated with the authorized work that has been completed.
Actual Cost (AC) : realized cost incurred for the work performed on an activity during a specified time period.
Schedule Variance (SV) : difference between the earned value and the planned value. (EV-PV). Schedule variance will be 0 when the project is completed.
Cost Variance (CV) : difference between the earned value and actual cost. (EV-AC). Negative CV is often difficult for the project to recover.
Schedule Performance Index (SPI) : expressed as a ratio of Earned value to planned value (EV/PV). Less than 1, less work completed than planned.
Greater than 1, more work completed than planned
Cost Performance Index (CPI) : expressed as a ratio of Earned value to actual cost (EV/AC)
Less than 1 -> cost overrun for work completed
Greater than 1 -> cost underrun of performance to date.
S-Curves
Forecasting :
Estimate at completion (EAC) : EACs are typically based on actual costs incurred for work completed, plus an estimate to Complete (ETC).
EAC = AC + Bottom-up ETC.
EAC forecast for ETC work performed at the budgeted rate : EAC = AC + (BAC -EV)
EAC forecast for ETC work performed at the present CPI : EAC = BAC / CPI
EAC forecast for ETC work considering both SPI and CPI factors : EAC = AC + [(BAC - EV)/(CPI*SPI)]
To-complete performance index (TCPI): expressed as the ratio of the cost to finish the outstanding work to the remaining budget. TCPI = (BAC-EV)/(BAC-AC) or (BAC-EV)/(EAC-AC)
Performance reviews:
Variance at completion VAC = BAC - EAC
Trend analysis
Earned value performance
Project Management Software:
Reserve Analysis:
Outputs:
Work performance information / Costs forecasts / Change requests / Project management plan updates (Cost baseline, cost management plan) / Project document updates / Organizational process assets
Input:
Project Management plan (Scope baseline, Schedule baseline, Other information)
Project charter
Enterprise Environment factors
Organizational Process Assets
Tools and Techniques:
Expert judgment/Analytical Techniques (pay back period, return on investment, internal rate of return, discounted cash flow and net present value)/Meetings
Output:
Cost Management plan
Units of measure, Level of precision, Level of accuracy, Organizational procedure links, Control thresholds, Rules of performance measurement, Reporting formats, Process descriptions, Additional details
------
Estimate Costs:
Estimate costs is the process of developing an approximation of the monetary resources needed to complete project activities. Amount of cost required to complete project work.
Project in the initiation phase may have a rough order of magnitude (ROM) estimate in the range of -25% to +75%. Later, more info is known, definitive estimates could narrow the range of accuracy to -5% to +10%.
Costs are estimated for labor, materials, equipment, services and facilities, as well as special categories such as inflation allowance, cost of financing, or contingency costs.
Inputs:
Cost Management plan/Human Resource management plan/Scope baseline (Project scope statement, WBS, WBS dictionary)/Project Schedule/Risk Register/Enterprise Environmental Factors/Organizational Process Assets
Tools and Techniques:
Expert judgment / Analogous Estimating / Parametric Estimating / Bottom-up Estimating / Three-point Estimating / Reserve Analysis (contingency reserves - "known-unknowns" & Management reserves - "unknown-unknowns") / Cost of Quality (COQ) / Project management software / Vendor bid analysis / Group Decision-making Techniques
Outputs:
Activity cost estimates / Basis of Estimates / Project document updates
-------------
Determine Budget
Inputs:
Cost Management plan / Scope Baseline (Project Scope statement, WBS, WBS dictionary) / Activity Cost estimates / Basis of estimates / Project schedule / Resource calendars / Risk Register / Agreements / Organizational Process Assets
Tools and Techniques:
Cost Aggregation / Reserve Analysis / Expert judgment / Historical Relationships / Funding limit reconciliation
Outputs:
Cost Baseline / Project funding requirements / Project document updates
-----------
Control Costs
Inputs:
Project Management plan (cost baseline, Cost management plan) / Project funding requirements / Work performance data / Organization process assets
Tools and Techniques:
Earned Value management is a methodology that combines scope, schedule and resource measurements to assess project performance and progress.
Planned Value (PV): authorized budget assigned to schedule work (not includes management reserve). The total planned value for the project is also known as budget at completion (BAC)
Earned Value (EV): is a measure of work performed expressed in terms of the budget authorized for that work. budget associated with the authorized work that has been completed.
Actual Cost (AC) : realized cost incurred for the work performed on an activity during a specified time period.
Schedule Variance (SV) : difference between the earned value and the planned value. (EV-PV). Schedule variance will be 0 when the project is completed.
Cost Variance (CV) : difference between the earned value and actual cost. (EV-AC). Negative CV is often difficult for the project to recover.
Schedule Performance Index (SPI) : expressed as a ratio of Earned value to planned value (EV/PV). Less than 1, less work completed than planned.
Greater than 1, more work completed than planned
Cost Performance Index (CPI) : expressed as a ratio of Earned value to actual cost (EV/AC)
Less than 1 -> cost overrun for work completed
Greater than 1 -> cost underrun of performance to date.
S-Curves
Forecasting :
Estimate at completion (EAC) : EACs are typically based on actual costs incurred for work completed, plus an estimate to Complete (ETC).
EAC = AC + Bottom-up ETC.
EAC forecast for ETC work performed at the budgeted rate : EAC = AC + (BAC -EV)
EAC forecast for ETC work performed at the present CPI : EAC = BAC / CPI
EAC forecast for ETC work considering both SPI and CPI factors : EAC = AC + [(BAC - EV)/(CPI*SPI)]
To-complete performance index (TCPI): expressed as the ratio of the cost to finish the outstanding work to the remaining budget. TCPI = (BAC-EV)/(BAC-AC) or (BAC-EV)/(EAC-AC)
Performance reviews:
Variance at completion VAC = BAC - EAC
Trend analysis
Earned value performance
Project Management Software:
Reserve Analysis:
Outputs:
Work performance information / Costs forecasts / Change requests / Project management plan updates (Cost baseline, cost management plan) / Project document updates / Organizational process assets
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