Project Cost Management Notes PMBOK6 -Part 1

The Early Stage

 Developing an approximation of the monetary resources needed to complete project activities.

 Aggregating the estimated cost of individual activities or work packages to establish an authorized cost     base line.

 Monitoring the status of the project to update the project cost and managing changes to cost baseline.

Providing guidance and direction on how the project cost will be managed throughout the project.

 Supporting documentation that provides a clear and complete understanding of how the cost estimate was derived.

 You know you may have to rework on some part of the project, or project deliverable later, but the amount for this is unknown for you at this stage

The part of Budget intended to address the “known-unknowns” works that can affect the project

The part of Budget intended to address the “unknown-unknowns” or unforeseen work   that can affect the project

Cost Control involves analyzing the relationship between consumption of project fund and the value of the work accomplished

1. Analogous Estimating(Top Down)
2. Parametric Estimating
3. Bottom-up Estimating

•  use historical activity cost data of similar projects to determine 
• Relies of expert judgment
• Use this technique when limited information available

•  use mathematical calculations or models to determine activity costs
•  generally more accurate
•  E.g. it costs $100 to install 20m of wires, thus, it will cost $1000 to install 200m.

• detailed estimating is done for each activity or work package
• the estimates are then rolled up into control accounts and finally into an over project estimate, 

 an estimation of what the activity will cost upon completion based on information known to date.

• Basis of estimation
• Assumptions
• Constraints
• Range of possible estimates
• Confidence level of final estimate

• Variable costs
• Fixed costs 
• Direct costs 
• Indirect cost

  these costs change with the amount of production or the amount of work

  Examples: cost of material, supplies, and wages

these costs do not change as production changes

Examples: rent, equipment, etc.

these costs are directly attributable to the work on the project

Examples are team travel, team wages, recognition, and costs of material used on the project

indirect costs are overhead items or costs incurred for the benefit of more than one project

Examples include taxes, fringe benefits, and janitorial servicesCost of quality – The total cost of all efforts related to quality