COST MANAGEMENT
Overview
Plan cost Management process
Cost management plan
Life cycle costing
Value Engineering
Estimate Costs process
Types of Cost (4 mains)
Estimating
Inputs to estimating cost
Determine budget process
Accuracy of estimates
Project budget components
Control cost process
Progress reporting
Earned value management
Definition: Process required to complete the project in which the approve budget
Major Output
Project budget (cost baseline)
Primarily concerns with the cost of resources need to complete project activities
Cost management process
Plan cost management
Estimate cost - Planning
Determine budget - planning
Control costs - Monitoring & controlling
Establishing policies, procedure, and documentation for planning, expending and controlling project costs
Provide guidance and direction on how the project costs will be managed throughout the process
Major output: Cost management plan
How will i go about planning cost for th eproject
How will I manage the project to the cost baseline
Part of project management pln
Cost management plan includes
Unit of measure
Level of precision - rounding up or down
Control thresholds
Rules of performance measurement (EVP technique)
Reporting format
Additional deteails
looking at the cost of whole life of product, not just the cost of product in the project
Finding less costly way of the same work
if team is devreasing costs with same scope, they are performing value analysis
Process of developing an approximation of the monetary resources needed to complete project activities
Estimate for each activities are done
Dertermines the amount of cost required to complete project work
Costs are estimated for all resoures that will be charged to the project - labor, materials, equipment,...
Estimation costs are similar to estimating done in time management
Recap - important points about estimateting
Should be based on WBS improve accuracy
ETA of an activity should be done by the person doing the work
Historical information from past projects is key
Cost baseline should be taken in the beginning and should not be changed except change request
Chnages should be requested when cost problem occur
Project manager may periodically recalculate the estimate to complet
There is a process fro creating the most accurate eta
PM must meet any agreed upon ETA
ETA can be decreased by reducing the risks
Cost of all work needed to complete the project is ETA including
cost of quality efforts
cot of risk effort
cost of project manager's time
Cost of project managemet activities
Cost directly associated with project - trainig, paper, pencils
cost of office expenses
profit when applicable
Overhead costs - management salaries, general office expenses
Variable Costs: Costs change with amount of Production/ work - Wages, material
Fixed cost: do not change as production change- set up cost and rental cost
Direct costs: Direct attributable to the work on project - wages, materials
In deric cost: Overhead item or costs incurred for the benific of more than one project - taxt, security of company
Scope baseline
Project schedule
Timing of somthing you buy affects its cost
you need to develop a time phased spending plan
Human Resource Plan
Rewards, Labor rates, qualifications, quality
Risk register
Risks are input & output for ETA costs process
Cost for risk control
Policies on ETA templates, process, procedures, lessons learned and historical infor
Company culture and existing systems
Project management costs
Effort of project manager, status report,..
Tools and technique used in estimate activity duaration process can be used in estimate costs process as well
One point ETA
Analogus estimating
Parametric ETA
3 point ETA
A new technique for cost ETA
Bottom up ETA
- Detailed ETA is done for each activities or work package
- ETA are rolled up to control accounts
- Then into overall project ETA
Require an accurate WBS
ETA in early phase of a project are less than those made later in the project
ETA must be in a range
Ranges are wider in the beginning of the project and will narrow as more information is dertermined during project
ROM- Rough Order of Magnitude
Usually made in initiating
Budget ETA
25%- 75% for actual
Usually made in planning
In the range of 10 % to 25% from actual
Definitive ETA
Later during the project, ETA will become more refinied
Range +_ 10 % or 5%
Process of arregating the estimated costs of individual activities or work packages to establish an authorized cost baseline
Determine the cost baseline
Budget = total cost of the project
Budget defines how much mony need to prepare during the project
Project estimate canot completed without risk management activities and the inclusion of reserves
Contingency reserves: to address the cost impacts of remaining risks
Management Reservers: to address the cost of any unforeseen risks or changes