Limiting the number of design reviews can reduce project costs, but may increase the resulting product operating costs.
Another aspect of cost management is to recognize that different parties will use different methods to measure project costs at different times.

Project cost management trends and emerging practices

Another aspect of cost management is to recognize that different parties will use different methods to measure project costs at different times.
If the earned progress is greater than 0, it means that the project's progress is advanced; in other words, at a given point in time, the project's earned value is greater than the planned value.
Earned schedule theory provides a formula for predicting the completion date of a project through earned schedule, actual time, and estimated duration.

Clipping considerations

Knowledge management, estimation and budgeting, earned value management, use of agile methods, governance

Considerations for agile / adaptive environments

For projects with high volatility, unclear scope, and frequent changes, detailed cost calculations may not help much. The detailed estimate is applicable to short-term planning using punctuality.

7.1 Planning cost management

The cost management plan is an integral part of the project management plan, and its processes, tools and techniques should be recorded in the cost management plan

7.1.1 Planning cost management: input

Project charter, project management plan, business environmental factors, organizational process assets

7.1.1.1 Project Charter

Pre-approved financial resources

7.1.1.2 Project management plan

Schedule management plan, risk management plan

7.1.1.3 Business environmental factors

Organizational culture and structure, market conditions, currency exchange rates, business information, project management information systems, productivity differences in different regions

7.1.1.4 Organizational process assets

Financial control procedures, historical information and lessons learned databases, financial databases, existing formal and informal cost estimation policies, procedures and guidelines

7.1.2 Planning progress management: tools and techniques

Expert judgment, data analysis, meetings

7.1.2.1 Expert judgment

Previous similar projects, information from industry disciplines and application areas, cost estimation and budgeting, earned value management

7.1.2.2 Data analysis

Alternative analysis.

7.1.2.3 Meeting

The project team may hold a planning meeting to develop a cost management plan. Participants may include project managers, project sponsors, selected project team members, selected relevant parties, project cost leaders, and other necessary personnel.

7.1.3 Planning cost management: output

Cost management plan

7.1.3.1 Cost management plan

Accuracy
Accuracy
unit of measurement
Organizational program link (The WBS component used in project cost accounting is called a control account (CA), and each
control account has a unique code or account number that is directly linked to the implementing organization's accounting system.)
Control threshold (maximum difference allowed)
Performance measurement rules
- Define the control account used for performance measurement in WBS
- Determine the proposed EVM technology
- Specify the tracking method (EVM formula verifies the completion estimate from the bottom-up method)
report format
Other details
- Explanation of the strategic financing plan
- Procedures for dealing with exchange rate fluctuations
- Procedures for recording project costs

7.2 Estimated cost

Estimated cost is a process of approximately estimating the cost of resources required to complete the project work. The main function is,Determine the funding required for the project, As needed, throughout the project period.
Cost estimation is a quantitative assessment of the possible cost of resources required to complete an activity. It is a cost forecast based on known information at a specific point in time.
Usually a certain monetary unit (such as US dollar, euro, Japanese yen, etc.) is used for cost estimation, but sometimes other units of measurement can also be used, such as human hours or human daysTo eliminate the effects of inflationFor easy cost comparison.
During the start-up phase, the project ’sRough order estimation（Rough Order of Magnitude，ROM），The range is −25% to + 75%; Later, as the information gets more and moredetailed, The interval of deterministic estimationCan be reduced to −5% to + 10%。

7.2.1 Estimated cost: input

Project management plan, project documents, business environmental factors, organizational process assets

7.2.1.1 Project management plan

Cost management plan, quality management plan, scope basis (project scope statement, work breakdown structure, WBS dictionary)

7.2.1.2 Project file

Lessons learned register, project schedule (including the type, quantity and available time of available teams and physical resources of the project), resource requirements, risk register

7.2.1.3 Business environmental factors

Market conditions, published business information, exchange rates and inflation rates

7.2.1.4 Organizational process assets

Cost estimation policy, cost estimation template, historical information and knowledge base of lessons learned

7.2.2 Estimated cost: tools and techniques

Expert judgment, analogy estimation, parameter estimation, bottom-up estimation, three-point estimation, data analysis, project management information system, decision-making

7.2.2.1 Expert judgment

Previous similar projects, information from industry disciplines and fields, cost estimation methods

7.2.2.2 Analogue estimation

Cost analogy estimation uses parameter values or attributes of similar projects in the past to estimate

7.2.2.3 Parameter estimation

Refers to the use of statistical relationships between historical data and other variables(Such as square feet in building construction), to estimate the cost of project work, the accuracy of parameter estimation depends on the maturity of the parameter model and the reliability of the basic data.

7.2.2.4 bottom-up estimation

The most specific and detailed estimate of the cost of a single work package or activityAnd then take these detailed costsUpward summaryOr "scroll" to a higher level for subsequent reporting and tracking.

7.2.2.5 Three-point estimation

Triangular distribution of the most likely cost cm, the most optimistic cost co, the most pessimistic cost cp : expected cost ce = (cm + co + cp) / 3
beta distribution: ce = (co + 4 * cm + cp) / 6

7.2.2.6 Data analysis

Alternative analysis
Reserve analysis (emergency reserve is included inA portion of the budget within the cost basis to deal with the identified risks; Usually alsoPart of the budget to deal with "known"-"unknown" risks)。
Quality cost

7.2.2.7 Project Management Information System (PMIS)

Electronic forms, simulation software, and statistical analysis tools

7.2.2.8 Decision

Vote

7.2.3 Estimated cost: output

Cost estimation, basis for estimation, project file update

7.2.3.1 Cost estimation

The cost estimate includes a quantified estimate of the costs that may be required to complete the project work, an emergency reserve to address the identified risks, and a management reserve to deal with unplanned work. Can be summarized or detailed.

7.2.3.2 Basis of estimation

Documents on the basis of estimation, documents on all assumptions, documents on various known constraints, documents on identified risks that should be considered when estimating costs, descriptions of estimation intervals, confidence levels in final estimates Explanation

7.2.3.3 Project file update

Assumption log, lessons learned register, risk register

7.3 Budgeting

Budgeting is the process of summarizing the estimated costs of all individual activities or work packages and establishing an approved cost baseline. This process is carried out only once or only at the predefined points of the project.
The project budget includes all funds approved for project execution,andCost basisIs an approved project budget allocated by time period,Including emergency reserve, but not management reserve。

7.3.1 Budgeting: input

Project management plan, project documents, business documents, agreements, business environmental factors, organizational process assets

7.3.1.1 Project management plan

Cost management plan, resource management plan, scope basis (project scope statement, WBS and WBS dictionary details)

7.3.1.2 Project file

Basis of estimation, cost estimation, project schedule, risk register

7.3.1.3 Business documents

Business demonstration, benefit management plan

7.3.1.4 Agreement

Procurement instructions or main deliverables
Schedule, milestone, or date specified in the schedule
Performance report
Pricing and payment terms
Inspection, quality and acceptance standards
Warranty and subsequent product support
Incentives and punishment
Insurance and performance guarantee
Subcontractor approval
General terms and conditions
Change request processing
Termination clauses and alternative dispute resolution methods

7.3.1.5 Business environmental factors

exchange rate

7.3.1.6 Organizational process assets

Budget-related policy procedures and guidelines, historical information and lessons learned database, cost budgeting tools, reporting methods

7.3.2 Budgeting: tools and techniques

Expert judgment, cost summary, data analysis, historical information review, balance of capital restrictions, financing

7.3.2.1 Expert judgment

Previous similar projects, information from industry disciplines and application fields, financial principles, funding needs and sources

7.3.2.2 Cost summary

Summarize the cost estimate to the work package in WBS, and then summarize the work package to a higher level of WBS (such as control account)。

7.3.2.3 Data analysis

Data analysis techniques that can be used in the budgeting process include (but are not limited to)Reserve analysis of establishing project management reserve。Management reserveIt is a project budget set aside specifically for management and control purposes.Respond to unforeseen work within the scope of the project, The purpose is to deal with the "unknown-unknown" risk that will affect the project. When to useManage reserves to fund unforeseen workTime, it is necessary to use the management reservesAdded to the cost basis, resulting in a change in the cost basis。

7.3.2.4 Historical information review

Audit history information is helpful for parameter estimation or analog estimation.

7.3.2.5 Balance of capital restrictions

Balance capital expenditure

7.3.2.6 Financing

Get funding for the project

7.3.3 Budgeting: output

Cost benchmarks, project funding requirements, project file updates

7.3.3.1 Cost benchmark

The cost basis (not including any management reserves) is the sum of approved budgets for activities of different schedules.
For projects that use earned value management, cost benchmarks refer to performance measurement benchmarks.
Project budget = management reserve + cost basis
cost basis = cost of control account = emergency reserve + work package cost estimate
work package cost estimate = activity emergency reserve + activity cost estimate
increase management reserve above the cost basis (see Section 7.2.2.3) To get the project budget.

7.3.3.2 Project funding requirements

In the cost basis, bothIncluding estimated expenditure and estimated debt, invested in incremental ways, and may be unbalanced. The total capital requirement is equal toCost basis plus management reserve。

7.3.3.3 Project file update

Cost estimate, project schedule, risk register

7.4 Cost control

The budget can only be increased after approval from the practice of the overall change control process.
Cost control is the process of supervising project status to update project costs and manage cost basis changes.
The key to effective cost control lies inManage approved cost benchmarks。

Influence the factors that caused the change in cost basis
Ensure that all change requests are processed in a timely manner
When changes actually occur, manage changes
Ensure that the cost expenditure does not exceed the approved capital limit, neither exceed the limit allocated by time period, by WBS component, by activity, nor exceed the total project limit
Monitor cost performance, identify and analyze deviations from cost benchmarks
Monitor work performance against capital expenditure
Prevent unapproved changes in costs or resource usage reports
Report all approved changes and related costs to interested parties
Try to control the expected cost overrun to an acceptable range

7.4.1 Controlling costs: input

Project management plan, project documents, project funding requirements, work performance data, organizational process assets

7.4.1.1 Project management plan

Cost management plan, cost benchmark, performance measurement benchmark

7.4.1.2. Project file

7.4.1.3 Project capital requirements

Project funding requirements include projected expenditure and projected debt

7.4.1.4 Work performance data

Project status data

7.4.1.5 Organizational process assets

Policy procedure guidelines, cost control tools, monitoring and reporting methods

7.4.2 Cost control: tools and technology

Expert judgment, data analysis, performance index required for completion, project management information system

7.4.2.1 Expert judgment

Deviation analysis, earned value analysis, forecasting, financial analysis

7.4.2.2 Data analysis

Earnest value analysis (EVA)
- Planned value (PV), at a given point in time, the planned value represents the work that should have been completed. The sum of PV is sometimes called Performance Measurement Baseline (PMB), and the total project value of the project is also calledBudget at completion-BAC。
- The earned value (EV) EV calculation should correspond to the PMB, and the resulting EV value should not be greater than the PV budget of the corresponding component.
- Actual cost (AC) The actual cost of performing an activity is the total cost incurred to complete the work corresponding to the EV. There is no upper limit for AC, and any costs to realize EV must be included.
Deviation analysis:
- Progress deviation (Schedule Variance-SV= EV - PV) When the project is completed, all the planned value will be realized (that is, earned value), so the EVA progress deviation will eventually equal to zero. It is best to use schedule deviations with critical path method (CPM) and risk management. Positive values indicate advance.
- Cost deviation (Cost Variance-CV = EV – AC) A negative CV is generally irreversible. The cost deviation at the end of the project is the difference between the completion budget (BAC) and the actual cost.
- Progress performance index (Schedule Performance Index-SPI = EV/PV),> 1.0 means advance.
- Cost performance index (Cost Perfomance Index-CPI=EV/AC),> 1.0 indicates that there is a cost balance.
- 完工偏差（Variance at Complete -VAC = BAC(budget at complete) - EAC(Estimate At Complete)）
trend analysis
- chart
- Forecast (when calculating EAC, the actual cost of completed work is usually used, plus the estimated completion of remaining work (Estimate To Complete-ETC)).Bottom-up summary method: EAC = AC + bottom-up ETC。
  - ETC will be completed at the budget unit price (EAC = AC + (BAC – EV))
  - Assume that ETC work is completed with current CPI (EAC = BAC / CPI)
  - It is assumed that SPI and CPI will affect ETC work at the same time (EAC = AC + [(BAC – EV) / (CPI x SPI)])
Reserve analysis (to monitor the use of emergency reserves and management reserves in the project to determine whether these reserves are needed, or whether additional reserves need to be added)

7.4.2.3 Performance index required for completion

To complete performance index (TCPI) is a cost performance index that must be achieved by the use of remaining resources in order to achieve specific management goals. It is the ratio of the cost required to complete the remaining work to the remaining budget.
TCPI formula based on BAC: TCPI = (BAC – EV) / (BAC – AC)
TCPI formula based on EAC: TCPI = (BAC – EV) / (EAC – AC)
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7.4.2.4 Project Management Information System (PMIS)

Check the three indicators of PV, EV, and AC.

7.4.3 Cost control: output

Work performance information, cost forecast, change request, project management plan update, project file update

7.4.3.1 Work performance information

Evaluate deviations in the work performed and the cost of work at the work package level and the control account level. For earned value analysis projects, CV, CPI, EAC, VAC and TCPI will be recorded in the work performance report.

7.4.3.2 Cost forecast

EAC value needs to be recorded

7.4.3.3 Change request

Cost basis, schedule basis or other parts

7.4.3.4 Project management plan update