Project Cost Management & Estimation Techniques in IT Projects

What is Project Cost Management?

The processes required to ensure that the project is completed within an approved budget.

What are the types of scope in project management?

Product Scope and Project Scope.

What are the key components of project success criteria?

Value, scope, time, and budget.

What are the types of requirements in project management?

Business, Functional, Non-Functional, and Technical.

What is a sunk cost?

Money that has already been invested and cannot be recovered, regardless of future decisions.

What are contingency reserves?

Dollars included in a cost estimate to mitigate cost risk for partially planned future situations.

What are management reserves?

Dollars included in a cost estimate to cover unpredictable future situations.

What is life cycle costing?

Considers the total cost of ownership, including development and support costs for a project.

What is cash flow analysis?

Determines estimated annual costs and benefits for a project and the resulting annual cash flow.

What are tangible costs?

Costs or benefits that can be easily measured in dollars, such as direct costs related to project production.

What are intangible costs?

Costs or benefits that are difficult to measure in monetary terms, such as improved employee engagement.

What is a rough order of magnitude (ROM) estimate?

An estimate provided very early in the project life cycle, with a range of -25% to +75%.

What is a budgetary estimate?

An estimate done early in the project planning phase for budget approval, with a range of -10% to +25%.

What is a definitive estimate?

An estimate created later in the planning phase, used for cost control, with a range of -5% to +10%.

What is the purpose of estimating costs?

To develop an approximation of the costs of resources needed to complete a project.

What is the relationship between scope and cost?

Scope drives cost; changes in schedule can increase costs.

What are typical problems with IT cost estimates?

Estimates are often done too quickly, lack experience, and are biased toward underestimation.

What is parametric estimating?

Uses project characteristics in a mathematical model to estimate project costs.

What is bottom-up estimating?

Involves estimating individual work items or activities and summing them to get a project total.

What is the significance of reserves in project cost management?

Reserves are included in cost estimates to mitigate risks associated with unforeseen events.

What factors can lead to increased project costs?

Schedule compressions and delays.

What is the role of stakeholder management in project cost management?

To ensure that all parties involved are informed and engaged in the budgeting process.

What are project deliverables?

Specific outputs or results that must be produced to complete a project.

What is the importance of project assumptions?

Assumptions help define the boundaries and expectations of a project.

What is the purpose of a RACI chart?

To clarify roles and responsibilities of stakeholders in a project.

What is the typical range for a definitive estimate?

-5% to +10%.

What is the impact of optimism bias on project estimates?

It can lead to underestimating costs and overestimating project success.

What is the purpose of cost estimation tools and techniques?

To provide structured methods for accurately estimating project costs.

What is the total labor cost for the project?

To be calculated by summing individual costs

What is the purpose of budgeting in project management?

To allocate project cost estimates to individual work items over time

What does EVM stand for?

Earned Value Management

What is the formula for Cost Variance (CV)?

CV = Earned Value (EV) - Actual Cost (AC)

What does the Schedule Performance Index (SPI) measure?

The ratio of earned value to planned value (EV/PV)

What is the purpose of variance analysis?

To compare planned performance with actual performance

What is the formula for Estimate at Completion (EAC)?

EAC = BAC / CPI

What are the three key values calculated in EVM?

Planned Value (PV), Actual Cost (AC), Earned Value (EV)

What is the critical path in project management?

The sequence of stages determining the minimum time needed for an operation.

What is the significance of the cost performance index (CPI)?

It measures the cost efficiency and financial effectiveness of the project.

What is the purpose of the Cost Estimate Template mentioned?

To build assignments related to cost estimation.

What are some expenses to consider in project budgeting?

Travel expenses, rentals, food and meal expenses.