Passing the #PMP Exam—Study Group Discussions (The Process Matrix—Cost Knowledge Area)



In the last post, I went through the 6 processes in the Time knowledge area (chapter 6 of the PMBOK® Guide).

In this post, I go through the 3 processes in the Cost knowledge area (chapter 7 of the PMBOK® Guide).

Here’s where we are so far: the boxes in green are what has already been covered, and the boxes in yellow are being covered in this post. (Boxes in grey are to be covered in future posts.)

Initiating Planning Executing Monitoring & Controlling Closing
Integration 6

1

1

1

2

1

Scope 5

3

2

Time 6

5

1

Cost 3

2

1

Quality 3

1

1

1

Human Resources 4

1

3

Communications 5

1

1

2

1

Risk 6

5

1

Procurements 4

1

1

1

1

2

20

8

10

2

Here’s the portion of the process matrix that lists the processes in the Cost knowledge area, which is chapter 7 of the PMBOK® Guide.

Knowledge area # Initiating Planning Executing Monitoring & Controlling Closing
Cost 3

2

1

Here’s a description of the three processes that are included in the Cost Knowledge Area, 2 of which are in the Planning Process Group and 1 of which is in the Monitoring & Controlling Process Group.

In essence, this is almost an exact parallel to the Time knowledge area which was covered in the last post, and is covered by chapter 6 of the PMBOK® Guide. The 2 Planning processes take high-level estimates and bring them down to a specific, practical, step-by-step level. The 1 Monitoring & Controlling process checks to see if the project is on track, in this case with regards to costs as opposed to schedule, and if it is not, manages changes that bring it back on track. However, there are only 2 planning processes as opposed to five, so the processes in this knowledge area are quite a bit simpler overall.

Process

Group

Process

Number

Process
Name
Process Description
Planning 7.1 Estimate Costs Developing an approximation of the monetary resources needed to complete project activities.
7.2 Determine Budget Sums up the estimated costs and add reserves to establish an authorized cost baseline.
Monitoring & Controlling 7.3 Control Costs Monitoring the status of the project to update project budget and manage changes to the cost baseline.

Let’s take a closer look at the process descriptions, taken from the PMBOK® Guide. I think if you pay attention to the essence of what each process is, you will see how they flow from one to the other.

7.1 Estimate Costs

Costs are estimated by various methods that are based on past projects, on top-down or bottom-up estimates, or on averaging between pessimistic, neutral or optimistic assumptions. This gives you an estimate or ballpark figure of the project costs.

7.2 Determine Budget

Here, in a parallel to 6.5 Determine Schedule, once you have the work packages broken down into billable units of work called activities, you can now start adding them up to get the project baseline. Add the reserves for those risks which you’ve planned for (contingency reserves) and you get the cost baseline. Finally add the reserves for those risks which you’ve NOT planned for (management reserves) and you get the cost budget.

7.3 Control Costs

Here you use the tools such as earned value to find out whether your project is proceeding according to plan or not. This gives you a precise basis for recommending what to do to get it back on track.

The next post will cover the next Knowledge Area, that of quality management.

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