Program Cost

Management
By: Maridel Z. Viernes
 OBJECTIVES:

 To analyze the process program cost management.

 To identify the tool and techniques of program cost management.
 Program Cost Management

• Program Management is the process of managing and coordinating the multiple project
cost that are related and group as a whole.
 Project Cost Management

• Project Cost Management is done since 1950 that also called approximate project cost
and cost estimate. This involve of estimating the accrued amount for completion of project
with a defined scope.
Here are the benefits of efficient cost management practices:

 There are clear expectations with stakeholders

 Transparency is observed
 Progress tracking
 Maintain expected margin by avoid financial lost
 Benchmark for future projects
 Plan Cost Management

Image Source: Project Management Institute.2013. A Guide to the Project Management Body of Knowledge (PMBOK 195 ® Guide)
– Fifth Edition
1.Project Management Plan-This entails data to develop the cost management plan. The cost
management plan is compost but not limited to: scope baseline, schedule baseline, and other
information.
2.Project Charter-this provide budget summary from detailed develop project cost and define
project approval requirements.
 
3.Enterprise Environmental Factors- this can influence the Plan Cost Management but not
limited to organizational culture and structure, description of market conditions in region and
global, current exchange rates, published commercial information, and project management
information system.
4. Organizational Process Assets- the financial controls procedures, historical information
and lessen learned bases, financial databases, existing formal and informal cost estimating
and budget related policies, procedures and guidelines that may affect the plan cost
management.
 Plan Cost Management: Tools and
Techniques
1.Expert judgment- The professionals that work in specific area of discipline provide insights about the
environment and valuable information to the activity specifically in cost management plan.
 
2.Analytical Techniques-this consider the resources of project finance and organizational policies and
procedure that may affect project schedule and or risks. These techniques include but not limited to:
payback period, return on investment, internal rate of return, discounted cash flow, and net present value.
 
3.Meeting- This may need in order to develop the cost management plan. Meeting may attend by project
manager, project sponsor, selected team members, selected stakeholders and anyone with responsibility
for project costs.
 Plan Cost Management: Output

1.Cost Management Plan- This describe the manner of project cost will be planned,
structured and controlled. The cost management plan can establish the following:
 I. Estimate Costs

• This process that estimates the monetary resources that is required to complete the
project activities. This is a prediction based that identify and considers costing alternatives
to initiate and finish the project.
 Estimate Costs: Inputs

1.Cost Management Plan- this outline strategically the project budget that consist estimate,
allocation and control costs from the required resources that need to complete the project
activities.
2. Human Resource Management Plan- This consist of payment to staff that are responsible
to complete the project. (personnel rates, attributes and compensation).
3. Scope Baseline consist of the following:
a. Project Scope Statement
b. Work Breakdown Structure (WBS
c. WBS dictionary
4. Project Schedule- this includes the amount of time and type and quantity of resources that
needed to complete the work of the project.
Estimate Costs: Tools and Techniques

1.Expert Judgment- this is guided by historical information from prior similar project that provides
valuable insight about the environment and information.
2.Analogous Estimating-this estimate the same measures and parameter from previous and
current project that are similar. This is usually done when there is a limited amount of detailed
information about the project from historical information and expert judgement.
3.Parametric Estimating- This is accurate depends on underlying data. The data is calculate
through statistical relationship between relevant historical data and other variables in project. This
can apply either to a segment or to a total project in combination with other estimate methods.
 
4. Bottom-Up Estimating-this estimate with specified details the component of work then
summarizes it to higher levels for subsequent reporting and tracking purposes. This is influence by
size and complexity of the work package.
5. Reserve Analysis- this is the allocated budget to address the “known-unknowns” that can affect
a project. The budget is use to identify risk for contingent and mitigating responses are developed.
 
6. Cost of Quality (COQ)-this is assumption based that use to prepare the activity cost estimate.
.
7.Project Management Software-this consist of software applications, computerized
spreadsheets, simulation, and statistical tools are used to assist with cost estimating. This
simplifies the use of some cost-estimating techniques for rapid consideration of cost estimate
alternatives.
8.Vendor Bid Analysis- this analyzes the project cost based on the responsive bids from
qualified vendors. It may require by the project team to estimate additional cost after the
project are awarded to a vendor under competitive processes.
9.Group Decision-Making Techniques- this is a team-based approach such as brainstorming
to improve the estimate accuracy and the employees become committed to the emerging
estimates.
 Estimate Costs: Outputs

•1. Activity Cost Estimates- this is a quantitative assessment of the probable costs that can
be presented in summary form or in detail. Here the costs are estimated for all resources that
will utilize in activity cost estimate. This includes but not limited to direct labor, materials,
equipment, services, facilities, information technology, and special categories such as cost of
financing.
•2. Basis of Estimates- this pertains with documents that are clear and complete where
derived the cost estimate.
 II. Determine Budget

• This is the process of allocating the estimate cost of individual activities or project that can
use as cost baseline. Cost baseline use in measuring and evaluating the project cost
performance. The evaluation of project performance is needed in assessing the budget
needed for future phases of the project. Determine budget is also defined as the process
of aggregating the estimate cost of individual activities or work packages.
 Determine Budget: Inputs

1.Scope Baseline- This is formal limitation contains in project scope statement such as period of
expenditures of project funds that come from organizational mandates.
2. Activity Cost Estimates- this includes all the aggregated cost activity within a work package.
3. Basis of Estimates- this consist of cost estimate assumptions with supporting specify details.
4. Project Schedule-this include the start and end of work projects that can aggregate the cost
to the calendar period where the cost is planned to be incurred.
5. Agreements- this contains any information and costs that is related to products or services
that is included during budget determination
 Determine Budget: Tools and Techniques

1.Cost Aggregation
2. Reserve Analysis
3. Fund limit reconciliation
 Determine Budget: Outputs

1.Cost Baseline-This is the summation of approved budget for the different level schedule
activities.
2. Project Funding Requirements-this defined as the annual and quarterly payment derived
from cost baseline that is incremental and not continuous.
 III. Control Costs

• This process monitors the project status to update the project cost and manage changes
in the cost baseline by detecting variance. This tracks the finances as the project
progress to take a corrective action thus minimize risk.
 Control Costs: Inputs

1.Project Management Plan- this contains set of information that control cost.
2.Project Funding Requirements- this is the summation of project expenditures and
anticipated liabilities.
3.Work Performance Data- this provides information about project progress by identifying the
improvement of started activities and which deliverable have finished.
 Control Costs: Tools and Techniques

1.Earned Value Management- This is the integration of scope baseline with the cost baseline
and schedule baseline to form the performance baseline that can measure the duration of the
project.
2. Forecasting- This forecast the estimate for completion (EAC) and may differ from the
Budget at Completion (BAC) that is based from project performance. The EAC should
consider by the project manager when the BAC is not viable.
 Control Costs: Outputs

1.Work Performance Information- this provides details to measure the current status of various
2. Cost Forecasts- this compute the EAC value or a documented bottom-up EAC value then
communicated this to stakeholders. This provides the stakeholders the idea on how the project will
play out.
3. Change Requests- this happens due to project performance analysis by prevention and correction
actions and process review and disposition through the Perform Integrated Change Control process.
4. Updates in Project Management Plan, Project Documents, Organizational Process Assets.
 
Thank You