Espion4Ge - 07 Cost Management

Front 1

Cost management process

Back 1

1. Planning: Plan Cost Management
2. Planning: Estimate Costs
3. Planning: Determine Budget
4. M&C: Control Costs

Front 2

Earned value measurement

Back 2

integrates cost, time, and the work done (or scope) to forecast future performance and project completion dates and costs.

Front 3

PV

Back 3

- Planned value
- As of today, what is estimated value of work planned to be done?

Front 4

EV

Back 4

- Earned value
- As of today, what is estimated value of work actually accomplished?

Front 5

AC

Back 5

- Actual cost (total cost)
- As of today, what is estimated value of work actually accomplished?

Front 6

CPI

Back 6

- Cost Performance Index
EV/AC
> 1 is good
"we are getting $ ___ worth of work for every $1 spent"

Front 7

SPI

Back 7

- Schedule Performance Index
EV/PV
> 1 is good
"we are progressing at __% of the rate originally planned"

Front 8

BAC

Back 8

- Budget at Completion (the budget)
- "How much did we BUDGET for the TOTALproject effort?"

Front 9

EAC

Back 9

Estimate at completion
"What do we currently expect the TOTAL project to cost (a forecast)?"
several formulas:
1. AC + Bottom-up ETC [used when original estimate was flawed]
2. BAC/CPIcum [used if continue at same rate of spending]
3. AC + (BAC - EV) [used if current variances won't be what is in the future]
4. AC + (BAC - EV) / (CPIcum x SPIcum) [used if current variances won't be what is in the future AND project schedule constraints will influence the completion of the remaining effort; i.e. when a project with a cumulative CPI <1 and a firm completion date must be met]

Front 10

ETC

Back 10

Estimate to complete
"From this point on, how much MORE do we expect it to cost to finish the project (a forecast)?"

Front 11

VAC

Back 11

Variance at completion
"As of today how much over or under budget do we expect tobe at the end of the project?"

Front 12

CV

Back 12

Cost Variance
EV - AC
- negative is over budget, positive is under budget

Front 13

SV

Back 13

Schedule Variance
EV - PV
- negative is behind schedule, positive is ahead of schedule

Front 14

TCPI

Back 14

To-Complete Performance Index
(BAC - EV)/ (BAC - AC)
"In order to stay within budget, what rate must we meet for the remaining work?"
- greater than 1 is bad, less than 1 is good

Front 15

Cost baseline

Back 15

- includes contingency reserves
- represents the funds the project manager has authority to manage and control

Front 16

Cost budget

Back 16

- cost baseline + management reserves
- how much money the company should have available for the project

Front 17

Performance measurement baseline

Back 17

3 baselines (EVM):
1. scope baseline
2. schedule baseline
3. cost baseline

Front 18

Three-point estimating

Back 18

pessimistic, most likely, and opmistic cost

Front 19

Analogous estimating

Back 19

- estimate costs based on past history

Front 20

Bottom-up estimating

Back 20

- create detailed estimates for each part of an activity or work package and roll up

Front 21

Parametric estimating

Back 21

estimating cost based on formulas and histograms

Front 22

Inputs to estimating costs

Back 22

1. The cost management plan - documents methods used to estimate cost & level of accuracy required for estimates
2. The scope baseline - knowing what is out o scope and what constraints have been placed on the project
3. Project schedule - includes the activities, resources, and information needed to complete the work
4. Human resource management plan - lists the human resources and associated costs to be used for the project
5. Risk register - risks have associated costs
6. Organizational process assets
9. Enterprise environmental factors
10. Project management costs

Front 23

Cost management plan

Back 23

- output of Plan Cost Management
- same as "budget management plan" or "budget plan"
- requires thinking ahead about how to control costs

Front 24

Rough order of magnitude (ROM) estimate

Back 24

- Estimate is -25% to 75% from actual
- made during project initiating

Front 25

Definitive estimate

Back 25

+/- 10% from actual (some do -5 to +10% from actual)
- as project progresses and estimates can be more refined

Front 26

Budget estimate

Back 26

-10% to +25% from actual
- during project planning

Front 27

Reserve analysis

Back 27

- identify which activities on the project have significant risks and determining how much time and money to set aside to account for the risks if they occur.
- Contingency & Management reserves

Front 28

Contingency reserves

Back 28

- money set aside for known risks

Front 29

Management reserves

Back 29

- lump sum used to accommodate unknown/unidentified risks

Front 30

Cost risk

Back 30

- Cost Management concept
- Cost-related risk
- Seller has cost risk in a fixed-price contract

Front 31

Variable/fixed costs

Back 31

- Type of cost
- Variable: changes with the amount of production or the amount of work (cost of material, supplies, and wages)
- Fixed: does not change as production changes (cost of set-up, rent, utilities, etc.)

Front 32

Direct/indirect costs

Back 32

- Type of cost
- Direct: directly attributable to the work on the project (team travel, team wages, recognition, costs of material used on the project, training for the project, etc.)
- Indirect: overhead items or costs incurred for the benefit of more than one project (taxes, fringe benefits, and janitorial services)

Front 33

Life cycle costing

Back 33

- Cost Management concept
- Looking at costs over the entire life of the product, not just the cost of the project to create the product
- cheaper to implement with higher annual costs or spend more to implement with cheaper annual costs

Front 34

Value analysis

Back 34

- Cost Management concept
- Value engineering
- "How can we decrease cost on the project while maintaining the same scope?"

Front 35

Control thresholds

Back 35

What amount of variation between planned and actual costs will require action

Front 36

Progress reporting

Back 36

- PM can monitor completion of work packages as a way to show progress on deliverables within the time and cost allotted to them in the plan

Front 37

Cost of quality

Back 37

- Cost of work added to the project to accommodate quality efforts should be included in the project estimate

Front 38

Project management software

Back 38

- no such thing as 1 software package for how to manage project
- useful in this section for estimating

Front 39

Return on investment (ROI)

Back 39

- Analytical technique to make financing decision
- Measure the potential profitability of an investment by calculating the benefits received in relation to cost

Front 40

Discounted cash flow

Back 40

- Analytical technique to make financing decision
- Estimate the attractiveness of an investment by predicting how much money will be received in the future and discounting it to its current value