5th Edition PMBOK® Guide–Step 6: Memorizing Inputs & Outputs (Cost Management Part 1)


1. Introduction

In this next series of posts on memorizing the processes, we move on to the final step 6, which is memorizing the INPUTS & OUTPUTS associated with each of the 47 processes.   In order to breakdown the memorization into more bite-size chunks, I am breaking down the processes in the 10 knowledge areas into 2 or 3 posts each.

This post covers chapter 7 of the PMBOK® Guide, which covers the Cost Knowledge Area. This knowledge area contains 4 processes, three of which are in the Planning Process group, and the last of which is in the Monitoring & Controlling Process Group.

(I am splitting the discussion of the Inputs & Outputs into two different posts; this post will cover Processes 7.1 Plan Cost Management and 7.2 Estimate Costs.)

 

2.  Review of processes 7.1 and 7.2 ITTOs (Inputs, Tools & Techniques, and Outputs)

There are a total of four processes in the Time Management Knowledge Area.   Because of the large number of inputs and outputs, I am splitting my discussion of the inputs and outputs into two different posts, each one of which will cover two of the processes.    In that way, I can describe the inputs and outputs for these processes in a little bit of detail without the post becoming too long.

Here is a chart which shows the first and second processes, 7.1 Plan Cost Management and 7.2 Estimate Costs, together with their tools & techniques (which are discussed in a previous post) and their inputs & outputs.

NOTE:  the generic inputs known as Environmental Enterprise Factors and Operational Process Assets are given by their acronyms EEFs and OPAs, respectively.

Process Name Tools & Techniques Inputs Outputs
7.1 Plan Cost Management 1. Expert judgment

2. Analytical techniques

3. Meetings

1. Project management plan

2. Project charter

3. EEFs

4. OPAs

1. Cost management plan
7.2 Estimate Costs 1. Expert judgment

2. Analogous estimating

3. Parametric estimating

4. Bottom-up estimating

5. Three-point estimating

6. Reserve analysis

7. Cost of quality

8. Project management software

9. Vendor bid analysis

10. Group decision-making techniques

1. Cost management plan

2. Human resource management plan

3. Scope baseline

4. Project schedule

5. Risk register

6. EEFs

7. OPAs

1. Activity cost estimates

2. Basis of estimates

3. Project documents updates

3.  Outputs of processes 7.1 and 7.2

a. Cost management plan (7.1 Plan Cost Management)

This is the main output of the Plan Cost Management process.   The cost management plan describes how the project costs will be planned, structured, and controlled, and contains the following elements:

  • Units of measure, level of precision (the degree to which activity cost estimates will be rounded up or down), level of accuracy (e.g., ±10%)
  • Organizational procedures links (control accounts, the component of the work breakdown structure of WBS used for the project cost accounting)
  • Control thresholds (specifies an agreed-upon amount of variation to be allowed before some action needs to be taken)
  • Rules of performance measurement (sets the rules for earned value measurement or EVM)
  • Reporting formats
  • Process descriptions

b. Activity cost estimates (7.2 Estimate Costs)

Quantitative assessments of the probable costs required to complete project work, including direct labor, materials, equipment, services, facilities, information technology, and special financial categories such as cost of financing and a cost contingency reserve.

c. Basis of estimates (7.2 Estimate Costs)

Additional details supporting the cost estimate.

d. Project documents updates (7.2 Estimate Costs)

Includes the risk register (with costs of risk responses to be included in contingency reserves).

4.  Inputs of processes 7.1 and 7.2

a. Project management plan (7.1 Plan Cost Management)

Contains the scope baseline and the schedule baseline, in addition to other cost-related decisions in the area of risk and communications decisions.

b.  Project charter (7.1 Plan Cost Management)

Provides the summary budget from which the detailed project costs are developed.  Defines the project approval requirements that will influence the management of the project costs.

c.  Cost management plan (7.2 Estimate Costs)

The output of the previous process, the cost management plan defines how project costs will be managed and controlled, and includes the method used and the level of accuracy required to estimate activity cost.

d.  Human resource management plan (7.2 Estimate Costs)

Provides project staffing abilities, personnel rates, and related rewards/recognition, which are necessary components for developing the project cost estimates.

e.  Scope baseline (7.2 Estimate Costs)

Comprised of the

  • Project scope statement
  • WBS
  • WBS dictionary

f.  Project schedule (7.2 Estimate Costs)

The a) type and quantity of resources and b) the amount of time which those resources are applied to complete the work of the project are major factors in determining the project cost.

g.  Risk register (7.2 Estimate Costs)

Needs to be reviewed to consider risk response costs.

h. EEFs (7.1 Plan Cost Management and 7.2 Estimate Costs)

The inputs to the 7.1 Plan Cost Management process and 7.2 Estimate Costts are:

  • Organizational culture and structure
  • Market conditions (which determine what products, services, and results are available in the regional and global market)
  • Currency exchange rates for project costs sourced from more than one country
  • Published commercial information (such as resource cost rate information)
  • Project management information system (provides alternate possibilities for managing cost)

i.  OPAs (7.1 Plan Cost Management and 7.2 Estimate Costs)

The inputs to the 7.1 Plan Cost Management process are:

  • Financial controls procedures
  • Historical information and lessons learned knowledge bases
  • Financial databases
  • Existing formal and informal cost estimating and budgeting-related policies, procedures, and guidelines.
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