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S# Inputs Tools & Techniques Outputs 18 Estimate Costs: The process of developing an approximation of the monetary resources needed to complete project activities. It is performed after Define Scope, Create WBS, Define Activities, Estimate Activity Resources, and Estimate Activity Durations. # Cost of quality: Cost that is incurred to achieve required quality. # Stranded/Sunk Costs: costs incurred that cannot be reversed irrespective to future events. # Value Engineering / Analysis: Doing the same work for less (eg., outsourcing). To find a less costly way to do the same work. # Marginal analysis: Spend time on improvement if it improves revenues or productivity (From Quality KA - Looking for a point where the benefits or revenue to be received from improving quality equals the incremental cost to achieve that quality). # Order of Magnitude Estimate: Rough Order of Magnitude (ROM): -50% to +50% (at Initiation). # Fixed Costs: Costs that donot change as production changes (eg., setup, rental). # Variable Costs: Costs that change with the amount of production or the amount of work (eg., cost of material, supplies, wages). # Direct Costs: Costs that are directly attributable to the work on the proj (eg., team travel, wages, recognition & cost of material). # Indirect Costs: Costs that cannot be directly traced to the proj and therefore will be accumulated and allocated equitably over multiple projects (eg., taxes, fringe benefits). 1. Scope Baseline 1. Activity Cost Estimates 1. Expert Judgment PETRA VeBoCoP 2. Project Schedule 2. Basis of Estimates 2. Analogous Estimating (Top Down / Gross Value) 3. Human Resource Plan 3. Parametric Estimating (uses statistical relationship) 3. Project Document Updates (Cost Risks) 4. Risk Register 4. Three-point Estimates 5. EEF 5. Reserve Analysis (Contingency Reserves) 6. Bottom-up Estimating 6. OPA 7. Cost of Quality 8. Vendor Bid Analysis 9. Project Management Estimating Software 19 Determine Budget (Cost Performance Baseline): The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. Budget, is time-phased (WHAT costs will be incurred and WHEN they will be incurred). The Cost Baseline (or Performance Measurement baseline) describes a detailed budget that shows costs and timelines (time phased budget ) for each work package or activity. It is performed after Define Activities, Estimate Activity Resources, Estimate Activity Durations, Develop Schedule and Estimate Costs. # Larger projects may be divided into multiple Cost Baselines. #O1: Cost Performance Baseline (S-Curve) (see graph above) - Spending begins slowly, picks up speed until spending peak is reached, and then taperrs off as the project winds down. A variance b/w the funding limits and the planned expenditures (Funding Limit Reconciliation) will sometimes necessitate rescheduling of work to a point when funds will be available. The difference b/w funding requirements and the cost performance baseline at the end of the project is the management reserve. 1. Activity Cost Estimates 1. Cost Performance Baseline (S - curve) CHEF R 1. Cost Aggregation 2. Basis of Estimates 2. Reserve Analysis (Management Reserves) (projected Expenditures & anticipated Liabilities) 3. Scope Baseline 3. Expert Judgment 2. Project Funding Requirements (Dotted Steps) ^^ 4. Project Schedule 4. Historical Relationships (Expenditures, Liabilities, and Reserves) 5. Resource Calendars (Acquire Project Team) 5. Funding Limit Reconciliation ^^ 3. Project Document Updates 6. Contracts 7. OPA 20 Control Costs: The process of monitoring the status of the project to update the project budget and managing changes to the cost baseline. - Cumulative CPI: The rate at which the project performance is meeting cost expectations from the beginning up to a point in time. Also used to forecast project’s cost at completion. CPIC (CPI Cumulative)= EVC (EV Cumulative)/ ACC (AC Cumulative) = Which calculates the project's performance up to a point in time. - To-Complete Performance Index (TCPI): performance needed in order to achieve earned value targets (either financial or schedule). Two forms, TCPIC and TCPIS. # TCPI (Based on BAC) = Work Remaining i.e, (BAC-EV) / Remaining Funds i.e., (BAC-AC) (lower than 1 is good) # TCPI (Based on EAC) = Work Remaining i.e, (BAC-EV) / Remaining Funds i.e., (EAC-AC) (lower than 1 is good) # TCPI calculation is based on a specified management goal. If the cumulative CPI falls below the baseline plan, all future work of the project will need to immediately be performed in the range of the TCPI (BAC) to stay within the authorized BAC. Once management acknowledges that the BAC is no longer attainable, the PM will prepare a new EAC for the work, and once approved, the project will work to the new EAC value and it supersedes the BAC. # The EVM method works well in conjunction with manual forecasts of the required EAC costs. The most common EAC forecasting approach is a MANUAL, BOTTOM-UP SUMMATION by the PM & project team. # Project Manager monitor EV, both incrementally to determine CURRENT STATUS and cumulatively to determine long-term PERFORMANCE TRENDS. 1. Project Management Plan 1. Work Performance Measurements 1. Earned Value Management (Variances and Trends) 2. Budget Forecasts 2. Work Performance Information (Dir&Mng P Exec) 2. Forecasting (EAC and ETC) 3. Project Funding Requirements 3. To-complete Performance Index (TCPI) 3. Change Requests 4. OPA 4. Performance Reviews 4. Project Management Plan Updates 5. Variance Analysis (VAC) 5. OPA Updates 6. Project Management Software 6. Project Document Updates # Life Cycle Costing - Cost of whole life of the product; not just the cost of the project. Includes Acquisition, Operation, Maintenance, and Disposal Costs. # The Cost Management Processes and their associated tools and techniques are usually selected during the project life cycle definition, and are documented in the Cost Management Plan (which has been produced by Develop Proj Mgmt Plan Process). The Cost Mgmt Plan can establish the following: 1. Level of Accurary (Rounding of data), 2. Units of Measurement (Staff Hours, Staff Days, Weeks, or Lump Sum, currency, etc), 3. Organizational Procedures Links (The WBS component used for the Proj Cost Accounting is called the Control Account (CA). Each CA is assigned a unique code or account number that links directly to the performing organization's Accounting System), 4. Contol Thresholds (Thresholds are typically expressed as percentage deviations from the baseline plan), 5. Rules of Performance Measurement (EVM rules of performance measurement are set), 5. Reporting Formats (Formats & frequency of various cost reports are defined), and 6. Process Descriptions (description of each of the 3 cost mgmt processes are documented). 7. Establishment of Cost baseline # The Scope Statement provides the Product Description, Acceptance Criteria, Key Deliverables, Project Boundaries, Assumptions, and Constraints about the Project. # Project Cost Control includes: 1) Influencing the factors that create changes to the authorized cost baseline, 2) Ensuring that all change requests are acted on in a timely manner, 3) Managing the actual changes when and as they occur, 4) Ensuring that cost expenditures do not exceed the authorized funding, by period and in total for the project, 5) Monitoring cost performance to isolate and understand variances from the approved cost baseline, 6) Monitoring work performance against funds expended, 7) Preventing unapproved changes from being included in the reported cost or resource usage, 8) Informing appropriate stakeholders of all approved changes and associated cost, and 9) Acting to bring expected cost overruns within acceptable limits. # Control Threshold: Most actual project costs do not match the estimates exactly. The control threshold refers to the amount of variance the sponsor/stakeholders are willing to allow before action is required. Control Threshold is expressed as percentage of deviation allowed from the cost performance baseline. M&C PLANNING PLANNING
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