What is the Process - 7.1 Estimate Costs?
- Develop an approximation of the costs of resources required for project activities
- Estimates are based on the information known at a particular time, and can be expected to be reflined as the project proceeds, from a rough order of magnitude estimate during initiation in the +/- 50% range, to a later definitive or control estimate within a range of +/- 10%.
- Costs estimated include labor, materials, equipment, services, facilities, and special categories like inflation.
What are the INPUTS of the process - Estimate Costs?
1. Scope baseline, includes the project scope statement, the WBS, and WBS dictionary. These are the sources of information about components and products of the project, as well as assumptions and constraints.
2. Project schedule, Which includes the quantity and amount of time resources will be required. This achieves the close linkage between Estimate Activity Resources and Estimate Costs.
3. Human resource plan, indicates staffing requirements, cost rates, related reward costs
4. Risk register, so that risk mitigation costs are included in cost estimates.
5. Enterprise environmental factors, including market conditions and published commercial databases or seller price lists.
6. Organizational process assets, including cost estimation policies and templates, along with historical information and lessons learned
What are the TOOLS and TECHNIQUES of the process - Estimate Costs?
1. Expert judgement, to guide the application of historical and other information in determining project estimates.
2. Analogous estimating, which uses historical information from a previous project. Analogous estimating is useful when information and time are limited, but is not as accurate as detailed estimating.
3. Parametric estimating
4. Bottom-up estimating, which estimates at the lower levels then accumulates cost upward. It's more accurate than analogous estimate.
5. Three point estimates. Allows consideration of a range of possible estimates.
6. Reserve analysis, to set up contingency reserves to account for cost uncertainty. Contingency reserves are part of the project's funding requirements.
7. Cost of quality, to provide for quality assurance and control costs of the project.
8. Project management estimating software, including things like computerized spreadsheets, simulation and statistical tools
9. Vendor bid analysis in which vendor cost bids are analyzed to determine reasonable "should costs" estimates.
What are the OUTPUTS of the process - Estimate Costs?
1. Activity costs estimates, in summary form or in detail
2. Basis of estimates includes detail necessary to support the estimate and how it was determined. Also indicates the range of possible results as an indicator of the expected accuracy of the estimate.
3. Project document updates including the risk register.
What are Reserves?
- Contingency reserves are allowances for unplanned but potentially required changes resulting from the risks identified in the risk register. Included in the cost baseline.
- Management reserves are budgets reserved for unplanned changes to project scope and costs, and will usually require the project manager to obtain approval before spending management reserves.
- Management reserves are not included in cost baseline, but may be included in the project budget, and are not included in project earned value calculations.
Describe the Process - Determine Budget.
Aggregating the estimated cost of individual schedule activities or work packages to establish a total cost baseline for measuring project performance. It includes all authorized budgets but excludes management reserves.
What are the INPUTS of the process - Determine Budget?
1. activity cost estimates, from Estimate Costs process
2. Basis of estimates, from Estimate Costs
3. Scope baseline, containing the scope statement, which may contain limitations by period for project expenditures from the organization, contract, or government agency. It also includes the WBS and WBS dictionary.
4. Project schedule, from Develop Schedule, which provides the "when" for costs.
5. Resource calendars, which may indicate resource costs over the length of the project (e.g. rate increases)
6. Contracts for products, services or results that are purchased.
7. Organizational process assets, including policies, procedures, and guidelines related to budgeting, as well as budgeting tools and reporting methods.
What are the TOOLS AND TECHNIQUES of the process - Determine Budget?
1. Cost aggregation, which aggregates by work package, then to higher levels such as control accounts, and ultimately the entire project cost
2. Reserve analysis, to establish contingency and management reserve requirements.
3. Expect judgement, particularly related to the application area of the project.
4. Historical relationships for parametric or analogous estimates
5. Funding limit reconciliation, to relate timing of expenditures to any limitations on the commitment of funds during the project.
What are the OUTPUTS of the process - Determine Budget?
1. Cost performance baseline, an authorized time-phased budget used to measure and monitor project cost performance. Sumss the approved budget expenditures by time period, and is displayed as an S-curve showing accumulated expenditures over time.
2. Project funding requirements, which are set in a step function to stay ahead of the cost baseline considering cash flow delays.
3. Project document updates, including cost estimates, project schedule, and the risk register.
How is the Cost Baseline usually graphed?
The Cost Baseline is usually displayed as an S curve.
Describe the process - 7.3 Control Costs.
The process of monitoring project status to updates project budget and managing changes to the cost baseline.
This effort includes updating actual costs spent.
Any increase to the budget must be approved through Perform Integrated Change Control
As we monitor costs we also must ensure that we are receiving value for the cost expended. We will find the earned value management technique useful in this context.
What does Controlling Costs include?
Controlling costs includes:
- influencing factors that create changes to the cost baseline
- Ensuring requested changes are acted on timely
- Managing the actual changes when and as they occur
- Assuring that expenditures do not exceed the authorized funding by period and in total for the project.
- Monitoring cost performance to detect and understand variances from the cost baseline.
- Monitoring work performance against funds expended
- Preventing incorrect, inappropriate, or unapproved changes from being included in the reported cost or resource use.
- Informing appropriate stakeholders of approved changes
- Acting to bring expected cost overruns within approved limits.
What are the INPUTS of the process - Control Costs?
1. Project management plan, which contains the cost management plan and the cost performance baseline
2. Project funding requirements from Determine Budget
3. Work performance information which comes from Direct and Manage Project Execution, and provides deliverable status, actual costs and estimates for cmpleted work
4. Organizational process assets, including cost control policies, procedures, and guidelines, as well as tools and monitoring and reporting methods.
What are the TOOLS AND TECHNIQUES of the process - Control Costs?
1. Earned value management
2. Forecasting
3. To-complete performance index
4. Performance reviews
5. Variance analysis
6. Project management software
What are the OUTPUTS of the process - Control Costs?
1. Work performance measurements (CV, SV, CPI, and SPI) for WBS components and control accounts.
2. Budget forcasts
3. Organizational process assets updates with historical information and lessons learned
4. Change requests when the baseline must be changed. These are processed through Perform Integrated Change Control process.
5. Project management plan updates, including the cost performance baseline and the cost management plan
6. Project document updates, including cost estimates and basis of cost estimates
