6b - Budget

4 processes of Project Cost Management?

1. Plan Cost Management,

2. Estimate Costs,

3. Determine Budget,

4. Control Costs.

Output of the Plan Cost Management process?

Cost Management Plan.

Units of Measure in Cost Management

Each unit used in measurements - (staff hours, lump sum)

level of accuracy

The acceptable range of deviation, e.g., ± 10% plus contingency.

Control thresholds

• Variance thresholds for monitoring cost performance may be specified to indicate an agreed-upon amount of variation to be allowed before some action needs to be taken.

• Thresholds typically expressed as percentage deviations from the baseline plan.

Estimate Costs Process

• Accuracy of a project estimate increases as the project progress

• iterative process from phase to phase

• Estimate of all resources

What types of costs should be included in cost estimates?

Both direct and indirect costs.

What are the 7 inputs to the Estimate Costs process?

1. Cost Management Plan,

2. HR Plan,

3. Scope Baseline,

4. Project Schedule,

5. Risk Register,

6. EEFs,

7. OPAs.

What is the difference between 'analogous' and 'bottom-up' estimating techniques?

Analogous estimating is top-down and less accurate, whereas bottom-up estimating is detailed and rolled up.

Three-point estimating

A method that calculates cost estimates based on optimistic, pessimistic, and most likely estimates.

Cost of Quality (COQ)

Includes all costs incurred by investment in preventing nonconformance to requirements, appraising the product or service for conformance requirements and failing to meet requirements

Cost Basline

• Major output of determining budget step

• approved time phase budget which serves as the baseline

What are management reserves?

Funds outside the cost baseline but within the total project budget.

What is the main goal of the Control Costs process?

To monitor project costs and manage changes to the cost baseline.

Earned Value Management System' (EVMS)

• Set of rules and standards to track cost, budget and a quantified view of what is accomplished

• Helps explains why there are differences in the actual work performed vs planned and mitigation any consequence

What does BCWS stand for?

Budgeted Cost of Work Scheduled.

BCWP is

• Budgeted Cost of Work Performed

• What we said we do and when

• Estimate

ACWP

• Actual Cost of Work Performed

• represents what has been paid for everyone for what has been accomplished so far

ETC and EAC

• ETC = Estimate Time to Completion - estimate cost to perform the remaining work

• EAC = Estimate at Completion = AWCP + ETC

Cost Variance (CV)

• difference between expected cost of work and actual

• BWCP - ACWP

Schedule Variance (SV)

The difference between the cost of work planned to the current point in time and the work that was accomplished expressed as BCWP - BCWS

Positive Cost Variance indicates

the project is under budget.

What does the Percent-Complete Method involve?

• What percentage of the allotted work has been completed

• Used to calculate the BCWP

4 Tools and Techniques to Estimate Costs

1. Cost of Quality

2. Project Management Estimating Software

3. Vendor Bid Analysis

4. Group Decision Making Techniques

Reserve Analysis

Assess Contingency and management reserves for potential project cost uncertainties.

Budget at Completion (BAC)

Equal to BCWS without time passing.

Project Funding Requirements

• Output of Determining the Budget

• Temporal

• Incremental

Organizational Procedure links in the Cost Management Plan?

Each control account (WBS component) is assigned a code or account number linked directly to the performing organization’s accounting system.

BCWS - Budgeted Cost of Work Scheduled

A time-phased estimate of the cost of a project’s work.

BCWP - Budgeted Cost of Work Performed

• earned value term

• based on the value of the work that has been done based on the original estimate

• value not the cost of the work we have done so far

Variance at Completion (VAC)

• Calculated as BAC - EAC

• documented with a trend report, starting the reason for the variance