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7.1 Plan cost management
| Inputs | Tools and techniques | Outputs |
|---|---|---|
| Project management plan | Expert judgment | Cost management plan |
| Project charter | Meetings | |
| Enterprise environmental factors | Analytical techniques | |
| Organizational process assets |
Inputs
Project management plan
Project Charter
Enterprise Environmental Factors
Organizational Process Assets
Please refer to the common ITTOs
Tools and Techniques
Expert judgment
Analytical techniques
Meetings
Please refer to the common ITTO section
Output
Cost management plan
A document that details out how to estimate costs, add buffers and thresholds to change cost baseline.
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7.2 Estimate cost
| Inputs | Tools and techniques | Outputs |
|---|---|---|
| Cost management plan | Expert judgment | Activity cost estimates |
| Human resource management plan | Analogous estimating | Basis of estimates |
| Scope baseline | Parametric estimating | Project document updates |
| Project schedule | Bottom up estimating | |
| Risk register | three-point estimating | |
| Enterprise environmental factors | Reserve analysis | |
| Organizational process assets | Cost of quality | |
| Project management software | ||
| Vendor bid analysis | ||
| Group decision making techniques |
Input
Cost management plan
Human resource management plan
Scope baseline
Project schedule
Risk register
Enterprise Environmental Factors
Organizational Process Assets
Please refer to the common ITTO section.
Tools and Techniques
Expert judgment
Please refer to the common ITTO section
Analogous estimating
Based on the word analogy. When lessons from similar past projects are tapped either through repositories or experience of the project manager himself / herself or expertise of others who have executed similar projects to arrive at estimates, then it is called analogous estimation. Used when there is limited information about the project or a quick estimate is needed.
Parametric estimating
Parametric estimating is an estimating technique in which an algorithm is used to calculate cost or duration based on historical data and project parameters. Parametric estimating uses a statistical relationship between historical data and other variables (e.g., square footage in construction) to calculate an estimate for activity parameters, such as cost, budget, and duration.
Bottom up estimating
Bottom-up estimating is a method of estimating a component of work. The cost of individual work packages or activities is estimated to the greatest level of specified detail. The detailed cost is then summarized or “rolled up” to higher levels for subsequent reporting and tracking purposes
Three-point estimation
Based on statistical distribution to find out the mean estimate. It is based on three values – Optimistic estimate (O), Most likely estimate (M) and a Pessimistic estimate (P) and the mean is determined in two ways:
Triangular distribution = (O + M = P) / 3
PERT or Beta distribution = (O + 4M = P) / 6
Reserve analysis
Cost estimates may include contingency reserves (sometimes called contingency allowances) to account for cost uncertainty. Contingency reserves are the budget within the cost baseline that is allocated for identified risks, which are accepted and for which contingent or mitigating responses are developed. Contingency reserves are often viewed as the part of the budget intended to address the “known-unknowns” that can affect a project. For example, rework for some project deliverables could be anticipated, while the amount of this rework is unknown. Contingency reserves may be estimated to account for this unknown amount of rework.
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Cost of Quality (CoQ)
Ensuring quality involves performing certain activities and using better resources which incurs cost. And not ensuring quality results in repair, rework and warranty costs. Both put together, are called cost of quality. This is explained more in detail in the quality management KA.
Project management software
Vendor bid analysis
Analysis of the bids submitted by various vendors to understand the implication on cost.
Group decision making techniques
Please refer to previous sections and common ITTOs
Output
Activity cost estimates
Activity cost estimates are quantitative assessments of the probable costs required to complete project work. Cost estimates can be presented in summary form or in detail. Costs are estimated for all resources that are applied to the activity cost estimate. This includes, but is not limited to, direct labor, materials, equipment, services, facilities, information technology, and special categories such as cost of financing (including interest charges), an inflation allowance, exchange rates, or a cost contingency reserve. Indirect costs, if they are included in the project estimate, can be included at the activity level or at higher levels.
Basis of estimates
A detailed work out of the cost estimates that includes the heads, assumptions and constraints
Project document updates
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7.3 Determine budget
| Inputs | Tools and techniques | Outputs |
|---|---|---|
| Cost management plan | Cost aggregation | Cost baseline |
| Scope baseline | Reserve analysis | Project funding requirements |
| Activity cost estimates | Expert judgment | Project document updates |
| Basis of estimates | Historical relationships | |
| Project schedule | Funding limit reconciliation | |
| Resource calendars | ||
| Risk register | ||
| Agreements | ||
| Organizational process assets |
Input
Cost management plan
Human resource management plan
Scope baseline
Activity cost estimates
Basis of estimates
Project schedule
Resource calendars
Risk register
Agreements
Contract documents with vendors to whom part of the work is subcontracted or outsourced.
Organizational Process Assets
Please refer to previous section and the common ITTO section.
Tools and Techniques
Cost aggregation
Cost estimates are aggregated by work packages in accordance with the WBS. The work package cost estimates are then aggregated for the higher component levels of the WBS (such as control accounts) and ultimately for the entire project.
Reserve Analysis
Budget reserve analysis can establish both the contingency reserves and the management reserves for the project.
Expert judgment
Historical relationships
Any historical relationships that result in parametric estimates or analogous estimates involve the use of project characteristics (parameters) to develop mathematical models to predict total project costs. Such models may be simple (e.g., residential home construction is based on a certain cost per square foot of space) or complex (e.g., one model of software development costing uses multiple separate adjustment factors, each of which has numerous points within it).
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Funding Limit Reconciliation
The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. This is accomplished by placing imposed date constraints for work into the project schedule.
Output
Cost Baseline
The cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures and is used as a basis for comparison to actual results. It is developed as a summation of the approved budgets for the different schedule activities.
Project Funding Requirements
Total funding requirements and periodic funding requirements (e.g., quarterly, annually) are derived from the cost baseline.
Project Document Updates
Please refer the common ITTOs
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7.4 Control Costs
| Inputs | Tools and techniques | Outputs |
|---|---|---|
| Project management plan | Earned value management | Work performance information |
| Project funding requirements | Forecasting | Cost forecasts |
| Work performance data | To-complete performance index (TCPI) | Change requests |
| Organizational process assets | Performance reviews | Project management plan updates |
| Project management software | Project documents updates | |
| Reserve analysis | Organizational process assets updates |
Input
Project Management Plan
Project funding requirements
Work performance data
Organizational process assets
Please refer to previous section and the common ITTO section.
Tools and Techniques
Earned value management
Earned value management (EVM) is a methodology that combines scope, schedule, and resource measurements to assess project performance and progress. It is a commonly used method of performance measurement for projects.
Forecasting
As the project progresses, the project team may develop a forecast for the estimate at completion (EAC) that may differ from the budget at completion (BAC) based on the project performance. The forecasting is done with different formulas for different scenarios.
To-Complete Performance Index (TCPI)
The to-complete performance index (TCPI) is a measure of the cost performance that is required to be achieved
with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstanding work to the remaining budget.
Performance reviews
Performance reviews compare cost performance over time, schedule activities or work packages overrunning and underrunning the budget, and estimated funds needed to complete work in progress.
Project management software
Reserve analysis
During cost control, reserve analysis is used to monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested.
Outputs
Work performance information
Cost forecasts
Either a calculated EAC value or a bottom-up EAC value is documented and communicated to stakeholders.
Change requests
Project management plan updates
Project Document Updates
OPA updates
Please refer to previous sections and common ITTOs