Knowledge Area Project Cost Management PCM

About 12 exam questions on earned value. 6 of these require calculations. PCM includes the processes involved in estimating, budgeting and controlling costs so that the project can be completed within the approved budget. Cost Management is part of the Planning and Monitoring & Controlling Process group. There are 3 processes - Estimate Costs per activity or control account - Determine Budget - aggregate estimates to authorized cost baseline - Control costs monitor against baseline and manage changes to baseline Cost Management Plan Also known as Budget (management) plan. Similar to other management plans and part of the project management plan. Answers the following questions - How will I go about planning cost for the project - How will I effectively manage the project to the cost baseline, control costs and manage cost variances Life Cycle Costing Looking at the cost of the whole life of the product, not just the cost of the project Value Analysis Find less costly way to do the same work Cost Risk Cost related risk. E.g. Who has the cost risk in a fixed price contract? The seller

Estimate Costs
Coming up with cost estimates for each activity Estimating Principles are the same as in Project Time Management Types of Cost Variable Costs, Fixed Costs, Direct Costs, Indirect Costs Estimation Techniques Bottom-Up Expert Judgement One-point Analogous (top-down) Parametric Three-point Most likely, Optimistic, Pessimistic expected = (o+4*m+p) / 6 Reserve Analysis Cost of Quality

Accuracy of estimates Rough Order of Magnitude Estimate: +/- 50% project initiation Budget estimate: -10 / +25% project planning Definite Estimate: +/- 10% When completed, the Estimate Costs process results in activity cost estimates and an explanation of how those estimates were derived.

Determine Budget
Calculate total cost of project (incl. risk contingency reserves). This is the cost baseline. Project Manager has authority to mange and control cost baseline. Cost baseline + management reserves = cost budget

Control Costs
The control costs process is similar to the control part of any other knowledge area. Meaning follow the cost management plan

Earned Value Measurement/Management

EVM method for performance management Integrates scope, cost and schedule measures to measure project performance and progress Performance measurement baseline is combination of scope, cost and schedule baseline PV Planned Value EV Earned Value AC Actual cost BAC Budget at Completion EAC Estimate at Completion ETC Estimate to Completion VAC Variance at Completion CV Cost variance SV Schedule Variance CPI SPI What is the estimated value of the work planned to be done What is the estimated value of the work actually accomplished What is the actual cost incurred for the work accomplished How much did we BUDGET for the TOTAL project effort. = Cost baseline Actual Forecast for overall budget Actual Forecast how much additional budget is needed Actual Forecast for overall budget deviation NEGATIVE over budget NEGATIVE behind schedule > 1 GOOD > 1 Good

AC+ETC oder BAC/CPI EAC-AC BAC-EAC EV-AC EV-PV EV/AC EV/PV

EV comes first in every formula