4squareviews

The tools and techniques for the Process 7.4 Control Costs contain some which I call “generic”, meaning that they are used in every monitoring and controlling process called “Control X” where “X” stands for any knowledge area, including cost management.    Then there are some which are used specifically for schedule and/or cost management, like Data Analysis techniques such as

• Earned Value Analysis,
• Variance Analysis
• Trend Analysis
• Reserve Analysis

and the To-Complete Performance Index (TCPI) which uses earned value analysis as a forecast tool.

Let me quickly cover in this post the “generic” tools and techniques, and then in the next post, I’ll start covering earned value analysis.

The generic tools and techniques used in this process are (note that the numbering is not consecutive, because I am selecting out only those tools and techniques which are generic).

7.4.2 Control Costs:  Tools and Techniques

7.4.2.1 Expert Judgment

You want to make use of the expert judgment of either people on your project team or others who have expertise in the following areas:

• Earned value analysis (one of the main Data Analysis Techniques to uncover whether there is a variance between the actual costs of activities and the planned costs for those activities according to the project budget)
• Variance analysis (one of the Data Analysis Techniques done to determine the source of the variance if one is uncovered during earned value analysis)
• Trend analysis and forecasting (including the To-Complete Performance Index or TCPI, these Data Analysis Techniques will show what will happen to the project as a whole, either with regards to the overall project schedule or budget, if current trends continue that are uncovered by earned value analysis)
• Financial analysis (especially to see if funding for project is remaining within project funding requirements)

7.4.2.4 Project Management Information System (PMIS)

This is a tool, rather than a technique, and it is the software system used to monitor the three basic quantities used in earned value analysis, namely PV (planned value), EV (earned value), and AC (actual cost). and to assist with trend analysis and forecasting.

In the next post, then, we will start discussing Data Analysis Techniques starting with earned value analysis.   This is important not just for project managers doing a project, but for those studying for the PMP exam, because PMI loves asking questions about earned value analysis on the certification exam!

Filed under: Uncategorized | Leave a comment »

The first three processes in this cost management knowledge area are planning processes; this last one is a process in the monitoring and controlling process group.   Ass such, it follows a typical pattern for such processes.   The inputs come from the work performance data (i.e., how much did the activities actually cost?), and the cost management plan (i.e., how much were the activities supposed to cost according to the plan).   The tools and techniques basically do a comparison between the two, and if there is a discrepancy, what PMI likes to term a variance, the cause for this is determined, and the output of the process is a recommendation on how to correct this (the change requests), as well as the results of the analysis done during the process (work performance information).

Let’s go into detail regarding the inputs of this process.

7.4.1 Control Costs:  Inputs

7.4.1.1 Project Management Plan

• Cost Management Plan–this is an output of process 7.1 Plan Cost Management, and it contains guidelines on how to do all the other processes in the cost management knowledge area, including this one.   Here are some specific guidelines that pertain to process 7.4 Control Costs
  • Rules of performance measurement–Earned Value Management or EVM is a tool used in monitoring the performance of a project, including whether it is ahead of, on, or behind schedule.   The rules of how EVM will be used on the project should be specified, usually using one of the two measures Schedule Performance Index (SPI) or Schedule Variance (SV).
  • Control thresholds–once a variance is detected, the threshold should be set (usually in terms of a percentage deviation from the baseline plan as expressed in the SPI) ,so that any amount of variation above that threshold will cause certain actions to be taken.
  • Reporting formats–when the work performance reports are sent to the stakeholders, the formats of those reports, which stakeholders receive them, and the frequency of those reports should be specified.
• Cost baseline–this is an output of the last process 7.3 Determine Budget, and it represents the budget according to plan; it is what the actual costs are compared to in order to determine whether a variance exists.
• Performance measurement baseline–this is used in earned value analysis, which takes the three constraints of scope, schedule and cost and combines them to create a baseline from which to compare the actual results in terms of schedule and cost.  In the case of cost management, the quantities used are the Cost Performance Index (CPI) and the Cost Variance (CV).

7.4.2 Project Documents

The lessons learned register, an output of process 4.4 Manage Project Knowledge, is updated during this process to see if there are any procedures done by the project team that improve cost control; these lessons are stored in the register to be used later on in the project, and possibly on future projects as well.

7.4.1.3 Project Funding Requirements

This is another output of the previous process 7.3 Determine Budget.   This is done if the money for the project budget is not available from the parent organization all at once, and if it is supplied for use by the project team in increments.    In this case, the funding limits for each period are set up, and so it is important for the project manager to make sure that the expenditures during each period do not exceed the amount given by the periodic funding limit.

7.4.1.4 Work Performance Data

This is an output of process 4.3 Direct and Manage Project Work.   The data that pertains to this process include the actual costs that have authorized, incurred, invoiced and paid for activities done on the project.

7.4.1.5 Organizational Process Assets

• Policies, procedures and guidelines related to cost control (should be included in the Cost Management Plan), including methods for monitoring, controlling, and reporting information related to costs
• Cost control tools (the Project Management Information System, if created by another company as in the case of Microsoft Project, is considered an Enterprise Environmental Factor; if a tool is proprietary and created by the organization doing the project, it is an Organizational Process Asset)

The next post will cover the Tools and Techniques used in this process.

Filed under: Uncategorized | Leave a comment »

The scope of the project was broken down to the level of work packages with the scope management knowledge area, and each work package was then broken down into a series of activities in the schedule management knowledge area.   In the last process 7.2 Estimate Costs, the cost of each of those activities was estimated.   Now in this process, the cost of each work package is going to be aggregated from the cost of the activities it comprises, and then the total cost of the entire project is going to be aggregated from the cost of the work packages, and this will be the cost baseline against which the performance of the project will be measured going forward.

Let’s discuss the inputs to this process.

7.3.1 Project Management Plan

The components of the overall project management plan that will be inputs to this process are:

• Cost management plan–an output of process 7.1 Plan Cost Management, this gives guidelines on bow to do all of the other planning processes, including this one.
• Resources management plan–this provides information on the cost of resources which are needed to estimate the overall project budget.
• Scope baseline–this consists of three documents:
  • Project scope statement–breaks down the scope from the level of requirements discussed at the initiating process phase of the project, to the level of deliverables that fulfill those requirements
  • WBS (Work Breakdown Structure)–breaks down the scope from the level of deliverables (found in the project scope statement) to the level of work packages
  • WBS Dictionary–this contains information about the work packages related to other constraints (this will be updated with cost estimates as a result of this process)

7.3.1.2 Project Documents

7.2.1.2 Project Documents

Schedule Knowledge Area

• Basis of estimates–output of process 6.4 Estimate Activity Durations, this may contain assumptions related to the activities which may have a bearing on whether these costs should be included in the budget, particularly if they are indirect costs (costs not necessarily associated solely with the current project)
• Project schedule–output of process 6.5 Develop Schedule, contains planned start and finish dates for the activities and work packages, which may have a bearing on which calendar period these project costs are to be incurred in.

Cost Knowledge Area

• Cost estimates–As a result of process 7.2 Estimate Costs, cost estimates for each activity within a work package are aggregated to obtain a cost estimate for each work package,

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information on costs for risk responses.

7.3.1.3 Business Documents

These are documents created in the initiating process phase, which are the outputs of processes done by business analysts.

• Business case–includes the financial success factors for the project
• Benefits management–what are the benefits of the project on an ongoing basis to the firm?   The benefits management plan may include the target benefits, measured by net present value or return on investment, to give two examples.

7.3.1.4 Agreements

Agreements is the PMI code word for “contracts” between the company and vendors who are contributing resources to be used by the company to do the project, or products which will be incorporated as components of the project.

7.3.1.5 Enterprise Environmental Factors

For large-scale projects that extend multiple years with multiple currencies, it may be necessary to refer to exchange rates, so that any fluctuations in those rates and be considered in the upcoming process 7.3 Develop Budget.

7.3.1.6 Organizational Process Assets

• Historical information and lessons learned repository from previous similar projects.
• Existing cost budgeting-related policies and guidelines.
• Cost budgeting tools
• Reporting methods (which stakeholders get reports, in what format, and how often)

The next post will cover the tools and techniques of this process.

Filed under: Uncategorized | 4 Comments »

The scope of the project was broken down to the level of work packages with the scope management knowledge area, and each work package was then broken down into a series of activities in the schedule management knowledge area.   In the last process 7.2 Estimate Costs, the cost of each of those activities was estimated.   Now in this process, the cost of each work package is going to be aggregated from the cost of the activities it comprises, and then the total cost of the entire project is going to be aggregated from the cost of the work packages, and this will be the cost baseline against which the performance of the project will be measured going forward.

Let’s discuss the inputs to this process.

7.3.1 Project Management Plan

The components of the overall project management plan that will be inputs to this process are:

• Cost management plan–an output of process 7.1 Plan Cost Management, this gives guidelines on bow to do all of the other planning processes, including this one.
• Resources management plan–this provides information on the cost of resources which are needed to estimate the overall project budget.
• Scope baseline–this consists of three documents:
  • Project scope statement–breaks down the scope from the level of requirements discussed at the initiating process phase of the project, to the level of deliverables that fulfill those requirements
  • WBS (Work Breakdown Structure)–breaks down the scope from the level of deliverables (found in the project scope statement) to the level of work packages
  • WBS Dictionary–this contains information about the work packages related to other constraints (this will be updated with cost estimates as a result of this process)

7.3.1.2 Project Documents

7.2.1.2 Project Documents

Schedule Knowledge Area

• Basis of estimates–output of process 6.4 Estimate Activity Durations, this may contain assumptions related to the activities which may have a bearing on whether these costs should be included in the budget, particularly if they are indirect costs (costs not necessarily associated solely with the current project)
• Project schedule–output of process 6.5 Develop Schedule, contains planned start and finish dates for the activities and work packages, which may have a bearing on which calendar period these project costs are to be incurred in.

Cost Knowledge Area

• Cost estimates–As a result of process 7.2 Estimate Costs, cost estimates for each activity within a work package are aggregated to obtain a cost estimate for each work package,

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information on costs for risk responses.

7.3.1.3 Business Documents

These are documents created in the initiating process phase, which are the outputs of processes done by business analysts.

• Business case–includes the financial success factors for the project
• Benefits management–what are the benefits of the project on an ongoing basis to the firm?   The benefits management plan may include the target benefits, measured by net present value or return on investment, to give two examples.

7.3.1.4 Agreements

Agreements is the PMI code word for “contracts” between the company and vendors who are contributing resources to be used by the company to do the project, or products which will be incorporated as components of the project.

7.3.1.5 Enterprise Environmental Factors

For large-scale projects that extend multiple years with multiple currencies, it may be necessary to refer to exchange rates, so that any fluctuations in those rates and be considered in the upcoming process 7.3 Develop Budget.

7.3.1.6 Organizational Process Assets

• Historical information and lessons learned repository from previous similar projects.
• Existing cost budgeting-related policies and guidelines.
• Cost budgeting tools
• Reporting methods (which stakeholders get reports, in what format, and how often)

The next post will cover the tools and techniques of this process.

Filed under: Uncategorized | 4 Comments »

The scope of the project was broken down to the level of work packages with the scope management knowledge area, and each work package was then broken down into a series of activities in the schedule management knowledge area.   In the last process 7.2 Estimate Costs, the cost of each of those activities was estimated.   Now in this process, the cost of each work package is going to be aggregated from the cost of the activities it comprises, and then the total cost of the entire project is going to be aggregated from the cost of the work packages, and this will be the cost baseline against which the performance of the project will be measured going forward.

Let’s discuss the inputs to this process.

7.3.1 Project Management Plan

The components of the overall project management plan that will be inputs to this process are:

• Cost management plan–an output of process 7.1 Plan Cost Management, this gives guidelines on bow to do all of the other planning processes, including this one.
• Resources management plan–this provides information on the cost of resources which are needed to estimate the overall project budget.
• Scope baseline–this consists of three documents:
  • Project scope statement–breaks down the scope from the level of requirements discussed at the initiating process phase of the project, to the level of deliverables that fulfill those requirements
  • WBS (Work Breakdown Structure)–breaks down the scope from the level of deliverables (found in the project scope statement) to the level of work packages
  • WBS Dictionary–this contains information about the work packages related to other constraints (this will be updated with cost estimates as a result of this process)

7.3.1.2 Project Documents

7.2.1.2 Project Documents

Schedule Knowledge Area

• Basis of estimates–output of process 6.4 Estimate Activity Durations, this may contain assumptions related to the activities which may have a bearing on whether these costs should be included in the budget, particularly if they are indirect costs (costs not necessarily associated solely with the current project)
• Project schedule–output of process 6.5 Develop Schedule, contains planned start and finish dates for the activities and work packages, which may have a bearing on which calendar period these project costs are to be incurred in.

Cost Knowledge Area

• Cost estimates–As a result of process 7.2 Estimate Costs, cost estimates for each activity within a work package are aggregated to obtain a cost estimate for each work package,

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information on costs for risk responses.

7.3.1.3 Business Documents

These are documents created in the initiating process phase, which are the outputs of processes done by business analysts.

• Business case–includes the financial success factors for the project
• Benefits management–what are the benefits of the project on an ongoing basis to the firm?   The benefits management plan may include the target benefits, measured by net present value or return on investment, to give two examples.

7.3.1.4 Agreements

Agreements is the PMI code word for “contracts” between the company and vendors who are contributing resources to be used by the company to do the project, or products which will be incorporated as components of the project.

7.3.1.5 Enterprise Environmental Factors

For large-scale projects that extend multiple years with multiple currencies, it may be necessary to refer to exchange rates, so that any fluctuations in those rates and be considered in the upcoming process 7.3 Develop Budget.

7.3.1.6 Organizational Process Assets

• Historical information and lessons learned repository from previous similar projects.
• Existing cost budgeting-related policies and guidelines.
• Cost budgeting tools
• Reporting methods (which stakeholders get reports, in what format, and how often)

The next post will cover the tools and techniques of this process.

Filed under: Uncategorized | Leave a comment »

The cost management planning processes are fewer in number than the schedule planning processes because the schedule planning processes first require the scope developed in the scope management process group to be translated into action in the form of activities.   This is done in the “Define Activities” and “Sequence Activities” processes, which have as a by-product the Activities List and Activity Attributes.

This is the starting point for the Estimate Costs process whose main purpose is to take those activities in the Activities List and estimate their costs.   Once this is done, the totals of all the activities in each work package, and then each work package in the WBS, can be done in the following process “Determine Budget.”

Let’s discuss the inputs to this process before we go into specifics on the tools and techniques of the process itself.

7.2.1.1 Project Management Plan

• Cost management plan–the output of process 7.1 Plan Cost Management.   The specific guidelines that affect this process are:
  • Units of measure–this will be in dollars or the base currency of whatever country the project is being done in
  • Level of precision–how will the cost estimates be rounded up or down
  • Level of accuracy–what is the acceptable range, usually expressed in terms of plus or minus percentage, for determining realistic cost estimates.
• Scope baseline–there are three separate documents that comprise the scope baseline, which are
  • Project scope statement–breaks down the scope from the requirements to the deliverables needed to fulfill those requirements; may contain some overall financial assumptions and constraints that will affect the budget
  • WBS (Work Breakdown Structure)–the scope is broken down further from the deliverables to the level of work packages, which then are broken down to the level of the activities needed to complete each work package.
  • WBS Dictionary–contains information on the work packages, and will be updated with the cost estimate of the work package during the course of this process
• Quality management plan–information on cost of quality contained in this management plan may be used to evaluate the cost impact of quality-related activities on the project.

7.2.1.2 Project Documents

These are listed according to the knowledge area they pertain to.

Integration Knowledge Area

• Lessons learned register–this will be updated as a result of this process if there are any lessons learned during the cost estimating process that will be helpful to improve the accuracy and precision of the cost estimates

Schedule Knowledge Area

• Project schedule–this is the output of process 6.5 Develop Schedule.   The duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), combined with the information on the resources needed (see resource requirements document below), will be used to create the cost estimates, especially if those resources are charged per unit of time.

Resource Knowledge Area

• Resource requirements–this identifies the types and quantities of resources required for each work package or activity.   This, combined with the information contained in the project schedule of the duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), will be used to create the cost estimates during this process.

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information that can be used to estimate costs, especially when obtaining three-point estimates that include optimistic and pessimistic assumptions.

7.2.1.3  Enterprise Environmental Factors

• Market conditions–these will determine the standard costs for resources that may be used on the project
• Published commercial information–for any particular application area, there may be databases that contain standard human resource costs and standard costs for material and equipment that may be used on the project.

7.2.1.4 Organizational Process Assets

• Historical information and lessons learned repository, especially from similar projects to the one being done at present
• Cost estimating policies and templates (should be included in the Cost Management Plan)

With these inputs, we are ready to discuss the tools and techniques of this process.   Some of these are “generic” tools and techniques used in any planning process, such as expert judgment, decision making, and the Project Management Information System (the software program such as Microsoft Project).   However, there are some that are specific to the duration and cost estimating processes, such as

• analogous estimating
• parametric estimating
• bottom-up estimating
• three-point estimating
• data analysis techniques such as alternatives analysis, reserve analysis, and cost of quality

All of these will be discussed in the following post.

Filed under: Uncategorized | 2 Comments »

The cost management planning processes are fewer in number than the schedule planning processes because the schedule planning processes first require the scope developed in the scope management process group to be translated into action in the form of activities.   This is done in the “Define Activities” and “Sequence Activities” processes, which have as a by-product the Activities List and Activity Attributes.

This is the starting point for the Estimate Costs process whose main purpose is to take those activities in the Activities List and estimate their costs.   Once this is done, the totals of all the activities in each work package, and then each work package in the WBS, can be done in the following process “Determine Budget.”

Let’s discuss the inputs to this process before we go into specifics on the tools and techniques of the process itself.

7.2.1.1 Project Management Plan

• Cost management plan–the output of process 7.1 Plan Cost Management.   The specific guidelines that affect this process are:
  • Units of measure–this will be in dollars or the base currency of whatever country the project is being done in
  • Level of precision–how will the cost estimates be rounded up or down
  • Level of accuracy–what is the acceptable range, usually expressed in terms of plus or minus percentage, for determining realistic cost estimates.
• Scope baseline–there are three separate documents that comprise the scope baseline, which are
  • Project scope statement–breaks down the scope from the requirements to the deliverables needed to fulfill those requirements; may contain some overall financial assumptions and constraints that will affect the budget
  • WBS (Work Breakdown Structure)–the scope is broken down further from the deliverables to the level of work packages, which then are broken down to the level of the activities needed to complete each work package.
  • WBS Dictionary–contains information on the work packages, and will be updated with the cost estimate of the work package during the course of this process
• Quality management plan–information on cost of quality contained in this management plan may be used to evaluate the cost impact of quality-related activities on the project.

7.2.1.2 Project Documents

These are listed according to the knowledge area they pertain to.

Integration Knowledge Area

• Lessons learned register–this will be updated as a result of this process if there are any lessons learned during the cost estimating process that will be helpful to improve the accuracy and precision of the cost estimates

Schedule Knowledge Area

• Project schedule–this is the output of process 6.5 Develop Schedule.   The duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), combined with the information on the resources needed (see resource requirements document below), will be used to create the cost estimates, especially if those resources are charged per unit of time.

Resource Knowledge Area

• Resource requirements–this identifies the types and quantities of resources required for each work package or activity.   This, combined with the information contained in the project schedule of the duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), will be used to create the cost estimates during this process.

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information that can be used to estimate costs, especially when obtaining three-point estimates that include optimistic and pessimistic assumptions.

7.2.1.3  Enterprise Environmental Factors

• Market conditions–these will determine the standard costs for resources that may be used on the project
• Published commercial information–for any particular application area, there may be databases that contain standard human resource costs and standard costs for material and equipment that may be used on the project.

7.2.1.4 Organizational Process Assets

• Historical information and lessons learned repository, especially from similar projects to the one being done at present
• Cost estimating policies and templates (should be included in the Cost Management Plan)

With these inputs, we are ready to discuss the tools and techniques of this process.   Some of these are “generic” tools and techniques used in any planning process, such as expert judgment, decision making, and the Project Management Information System (the software program such as Microsoft Project).   However, there are some that are specific to the duration and cost estimating processes, such as

• analogous estimating
• parametric estimating
• bottom-up estimating
• three-point estimating
• data analysis techniques such as alternatives analysis, reserve analysis, and cost of quality

All of these will be discussed in the following post.

Filed under: Uncategorized | 3 Comments »

The cost management planning processes are fewer in number than the schedule planning processes because the schedule planning processes first require the scope developed in the scope management process group to be translated into action in the form of activities.   This is done in the “Define Activities” and “Sequence Activities” processes, which have as a by-product the Activities List and Activity Attributes.

This is the starting point for the Estimate Costs process whose main purpose is to take those activities in the Activities List and estimate their costs.   Once this is done, the totals of all the activities in each work package, and then each work package in the WBS, can be done in the following process “Determine Budget.”

Let’s discuss the inputs to this process before we go into specifics on the tools and techniques of the process itself.

7.2.1.1 Project Management Plan

• Cost management plan–the output of process 7.1 Plan Cost Management.   The specific guidelines that affect this process are:
  • Units of measure–this will be in dollars or the base currency of whatever country the project is being done in
  • Level of precision–how will the cost estimates be rounded up or down
  • Level of accuracy–what is the acceptable range, usually expressed in terms of plus or minus percentage, for determining realistic cost estimates.
• Scope baseline–there are three separate documents that comprise the scope baseline, which are
  • Project scope statement–breaks down the scope from the requirements to the deliverables needed to fulfill those requirements; may contain some overall financial assumptions and constraints that will affect the budget
  • WBS (Work Breakdown Structure)–the scope is broken down further from the deliverables to the level of work packages, which then are broken down to the level of the activities needed to complete each work package.
  • WBS Dictionary–contains information on the work packages, and will be updated with the cost estimate of the work package during the course of this process
• Quality management plan–information on cost of quality contained in this management plan may be used to evaluate the cost impact of quality-related activities on the project.

7.2.1.2 Project Documents

These are listed according to the knowledge area they pertain to.

Integration Knowledge Area

• Lessons learned register–this will be updated as a result of this process if there are any lessons learned during the cost estimating process that will be helpful to improve the accuracy and precision of the cost estimates

Schedule Knowledge Area

• Project schedule–this is the output of process 6.5 Develop Schedule.   The duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), combined with the information on the resources needed (see resource requirements document below), will be used to create the cost estimates, especially if those resources are charged per unit of time.

Resource Knowledge Area

• Resource requirements–this identifies the types and quantities of resources required for each work package or activity.   This, combined with the information contained in the project schedule of the duration estimates of each work package or activity (an output of process 6.4 Estimate Activity Durations), will be used to create the cost estimates during this process.

Risk Knowledge Area

• Risk register–the risk register (an output of process 11.2 Identify Risks, and updated in every risk management planning process that follows it) contains information that can be used to estimate costs, especially when obtaining three-point estimates that include optimistic and pessimistic assumptions.

7.2.1.3  Enterprise Environmental Factors

• Market conditions–these will determine the standard costs for resources that may be used on the project
• Published commercial information–for any particular application area, there may be databases that contain standard human resource costs and standard costs for material and equipment that may be used on the project.

7.2.1.4 Organizational Process Assets

• Historical information and lessons learned repository, especially from similar projects to the one being done at present
• Cost estimating policies and templates (should be included in the Cost Management Plan)

With these inputs, we are ready to discuss the tools and techniques of this process.   Some of these are “generic” tools and techniques used in any planning process, such as expert judgment, decision making, and the Project Management Information System (the software program such as Microsoft Project).   However, there are some that are specific to the duration and cost estimating processes, such as

• analogous estimating
• parametric estimating
• bottom-up estimating
• three-point estimating
• data analysis techniques such as alternatives analysis, reserve analysis, and cost of quality

All of these will be discussed in the following post.

Filed under: Uncategorized | 1 Comment »

This post covers the outputs of the Plan Cost Management process, namely the Cost Management Plan and what it contains.

7.1.3 Plan Cost Management:  Outputs

7.1.3.1 Cost Management Plan

There is only one output, the Cost Management Plan, which as explained in an earlier post, gives guidelines that help with all of the other cost management practices.   The PMBOK Guide simply lists them in no particular order, but I’m grouping them based on the process they are associated with.

7.2 Estimate Costs

• Units of measure–this will be in dollars or the base currency of whatever country the project is being done in
• Level of precision–how will the cost estimates be rounded up or down
• Level of accuracy–what is the acceptable range, usually expressed in terms of plus or minus percentage, for determining realistic cost estimates.

7.3 Determine Budget

• Organizational Procedures links–the Work Breakdown Structure is the framework which can be used to determine the overall budget based on estimates of the costs of individual work packages.

7.4 Control Costs

• Rules of performance measurement–Earned Value Management or EVM is a tool used in monitoring the performance of a project, including whether it is ahead of, on, or behind schedule.   The rules of how EVM will be used on the project should be specified, usually using one of the two measures Schedule Performance Index (SPI) or Schedule Variance (SV).
• Control thresholds–once a variance is detected, the threshold should be set (usually in terms of a percentage deviation from the baseline plan as expressed in the SPI) ,so that any amount of variation above that threshold will cause certain actions to be taken.
• Reporting formats–when the work performance reports are sent to the stakeholders, the formats of those reports, which stakeholders receive them, and the frequency of those reports should be specified

Now let us turn to the next planning process, where we estimate the costs for each work package in the WBS.

Filed under: Uncategorized | Leave a comment »

Since this is the first planning process for the knowledge area, with an aim towards creating the Cost Management Plan, the tools and techniques used in this process are the “generic” ones that apply to any knowledge area planning process, namely expert judgment, data analysis, and meetings.

Let’s discuss some of the specifics of these tools and techniques as they relate to the knowledge area of cost management.

7.1.2  Plan Cost Management:  Tools and Techniques

7.1.2.1  Expert Judgment

Who is going to assist your project team in creating the cost management plan?   Experts with specialized knowledge of:

• Creating the budget on previous similar projects
• Cost estimating and budgeting techniques that are used in the application area in general
• Earned value management

7.1.2.2 Data Analysis

What kind of options will be considered for funding the project?   Will it be self-funding from the organization’s overall budget, funding with equity, or funding with debt?  Alternatives analysis will help decide which option will be best for the organization, as well as how to acquire project resources (should you use your own resources, purchase them, rent or lease them?).

7.1.2.3 Meetings

Meetings should be held by the project team with experts invited (see 7.1.2.1 above) to help the team use the data analysis techniques mentioned above (see 7.1.2.2 above) in order to help put together the cost management plan.

The details of the cost management plan will be covered in the next post.

Filed under: Uncategorized | Leave a comment »