Project Cost Management
Project cost management, including cost and planning for the completion of the project in the approval of the budget, estimating, budgeting, financing, financing, management and control of each process to ensure the project is completed within the approved budget.
Key concept
Focus on the cost of capital needed to complete the project activities, but should also consider the use of project decisions on the cost of the project product, service, or result, the impact of maintenance and support costs of the
different stakeholders will unreasonable time, in different ways estimated project costs.
In many organizations, the financial benefit analysis and forecast products of the project is carried out outside the project, but for some items, such as fixed asset investment projects, can carry out this prediction and analysis in project cost management.
Trends and emerging practice
In project cost management practice, by extension of the Earned Value Management (EVM), the introduction of earned progress (ES) of the concept.
ES EVM is an extension of the theory. Progress earned by theory time AT and ES replace traditional schedule variance measure used EVM (earned value - Value Program), ES-AT schedule variance is calculated using this alternative method, if the progress earn larger than 0, then project ahead of schedule. Use earned progress measure of schedule performance index (SPI) than ES and AT, the work represents the efficient completion of the project. Earned earned progress through the progress of theory, practice time and the estimated time to provide the formula for calculating the predicted completion date of the project.
7.1 Planning Cost Management
Definition: to determine how to estimate, budget, management, supervision and control of the process of the project cost
effect: the duration of the project is to provide guidance on how to manage project cost and direction of
this process is carried out only once or projects carried out only in a predefined point
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Tools and Techniques
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Cost management plan
is an integral part of the project management plan, describes how to plan, schedule and control project costs
7.2 Estimated Cost
Definition: The process of monetary resources needed to complete project activities approximate estimate of
the role: to determine the funds required for the project,
this process needs to carry out on a regular basis throughout the project
Cost estimate is a quantitative assessment of the likely costs of the resources required to complete the activity, is at a particular point in time, based on the known cost information to make predictions.
Crude estimates (Rough Order of Magnitude) which more detailed information section as, the uncertainty estimates can be reduced to a range of -25% to + 75%, + 10% -5% of the start-up phase
should consider item fee all resources, including (but not limited to) labor, materials, equipment, services, facilities, as well as some special types of costs, such as inflation, subsidies, financing costs or emergency costs
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Tools and Techniques
Three estimates
- The most likely cost c0
- The most optimistic cost cM
- The most pessimistic costs cP
triangular distribution (c0 + cM + cP) / 3
beta distribution (c0 + 4cM + cP) / 6
data analysis
- Analysis of Alternatives
- Reserve analysis
to meet the cost of uncertainty in cost estimates may include contingency reserves (sometimes called "contingency fee"). Part of the budget contingency reserve is included in the cost basis. "Known - unknown" risk that part, for example, can predict some project deliverables require rework, but do not know how much of rework - Quality costs
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Cost estimate
includes the cost to complete the project work may need to address identified risks contingency reserve, and respond to unplanned work quantitative estimates of reserves management
Estimates are based on
support cost information needed to estimate the number and variety, due to application area, regardless of their level of detail, the supporting documentation should be clear and complete explanation of how cost estimates are out.
7.3 budgeting
Definition: a summary estimate the cost of all individual activities or work packages to establish a cost baseline approved process
action: Determine can monitor and control project performance baseline cost
of this procedure carried out only once or only carried out at a predefined point of the project
Project budget including all the funds approved for the implementation of projects, while cost basis is the allocation of the project budget by time period and approved, including contingency reserves , but does not include management reserve .
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Business Documents
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Business Case
to identify the critical success factors of the project, including financial success factors -
Effective management plan
includes the target efficiency
Tools and Techniques
Cost Summary
first cost estimate summary to the WBS work package, and then summarized by the work package to a higher level WBS (such as control accounts), and ultimately arrive at a total cost of the project
Data analysis
to establish reserve analysis of project management reserves for the project will affect the response to the "unknown - unknown" risks.
Management reserves are not included in the cost baseline, but part of the total budget and financial needs of the project.
When the use of management reserve funding unforeseen work, it is imperative to use the management reserves increased cost base, resulting in cost base changes.
Audit history information
facilitates parameter estimation and analogies.
Cost and accuracy of parametric models and analogies may be significant differences in the following cases, they will be the most reliable:
- Historical information is used to build an accurate model
- Model parameters are easy to quantify
- Model can be adjusted so that for large projects, small projects, and each project phase applicable
Financial constraints balance
should be any restrictions on the funding of the project, to balance the capital expenditure, if the difference between financial constraints and planned expenditures found, you may need to adjust work schedules to balance the level of capital expenditures.
Financing
obtain funding for the project. If the project uses external financing to fund the entity may make some requirements that must be met.
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Cost basis
It was approved, by time period allocated project budget does not include any management reserves can only be changed through formal change control procedures, used as a basis for comparison with actual results. The cost baseline is the sum of unreasonable schedule of activities approved budget.
Cost estimates before putting together the project activities and its emergency reserves to obtain cost-related work packages;
cost estimates and then aggregated for each work package and its emergency reserves to obtain cost control accounts;
then cost then aggregate all control accounts, obtain cost benchmark. For Earned Value Management project cost basis refers to the Performance Measurement Baseline.
Finally, the increase in cost management reserve the reference value, to get the project budget.
When there is the need to draw on reserves of change management, you should after obtaining the approval of the change control process, the appropriate amount of reserve management shifted the cost baseline.
Project funding needs
According to cost basis, determining the total funding requirements and periodic funding requirements.
Project funds are usually invested in an incremental manner, and may be non-equilibrium.
If there is management reserve, equal to the total capital cost benchmarks demand management reserve.
Cost Control 7.4
Definition: supervision of project status to update the project cost management and cost criteria changing process.
Role: The cost basis is maintained throughout the project
needed throughout the course of this project
To update the budget, it is necessary to know the actual cost so far. In the process of cost control, analysis should focus on the relationship between the project and the corresponding capital expenditures to complete the work. Effective cost control is the key to cost benchmarking approved.
Project cost control include:
- Factors influencing the cost baseline change
- Make sure that all change requests have been processed in a timely manner
- When the change actually occurs, these management changes
- Ensure that the costs do not exceed the approved financial support, that does not exceed by time period, by WBS components, by activity of quota allocation, the project does not exceed the total quota
- Performance monitoring costs, and find no deviation between analysis and cost basis
- Capital expenditure control, supervise work performance
- Prevent unauthorized cost or resources are yo will give you change report
- Change report to all parties and their associated costs approved
- Managed to expected cost overruns within acceptable range
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Tools and Techniques
Earned Value Analysis
The actual schedule and cost performance compared with the Performance Measurement Baseline. EVM the reference range, the reference cost and schedule baseline build up a Performance Measurement Baseline
- Planned value PV
is the budget approved for the planned assignment, which is to complete an activity or work breakdown structure (WBS) prepared an integral part of the approved budget, not including reserves management - Earned Value EV
to complete
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