Cost ManagementDr. Mostafa ElgamalaPMP-ITIL-IBDL-LDP8

RHCE-MCSA-CCNA/CCAI-CSCU

Project cost management: 1- Estimate costs (planning)2- Determine budget (planning)3- Control costs (monitor & control)

Estimate costsDeveloping an approximation of the monetary

resources needed to complete project activities.

Inputs

• Scope baseline

• Project schedule

• Human resource plan

• Risk register • OPA• EEF

Tools & techniques

• Expert judgment

• Analogous estimate

• Parametric estimate

• Three points estimate

• Project management estimating software

• Cost of quality• Vendor bid

analysis

Outputs

• Activity cost estimate

• Basis of estimate

• Project documents updates

Estimate costs tools & techniquesExpert judgment Analogous estimating (top down estimate) Parametric estimating Three point estimating Project management estimating software Cost of qualityVendor analysis.

Estimate costs outputs

Activity cost estimate Basis of estimates: assumption made.

Project document updates.

2- Determine budgetProcess of aggregating the estimated

costs of individual activities or work packages to establish an authorized cost baseline.

Inputs • Activity cost

estimate • Basis of

estimates • Scope baseline • Project

schedule • Resource

calendars • Contracts • OPA

Tools & techniques

• Cost aggregation

• Reserve analysis

• Expert judgment

• Funding limits reconciliation

Outputs • Cost

performance baseline

• Project funding requirements

• Project docuemnts updates

Cost aggregation: cost estimates are aggregated by work packages in accordance with WBS then work packages cost estimate aggregated for higher component level such as control account.

Reserve analysis: contingency reserve & management reserve

Determine budget tools & techniques:

Expert judgment Funding limit reconciliation: expenditure

of funds should be reconciled with any funding limits.

Determine budget output: Cost performance baseline: is an authorized time

phased budget at completion used to measure, monitor & control overall cost performance an the project.

Cost baseline = project estimate + contingency reserve

Cost budget = cost baseline + management reserve

3- Control costsProcess of monitoring the status of the

expenditure and managing changes to the cost baseline.

Inputs • Project

management plan

• Project funding requirements

• Work performance information

• OPA

Tools & techniques

• Earned value management

• Forecasting • Performance

reviews • Variance

analysis • Project

management software

Outputs •Work performance measurements •Budget forecasts •Organizational process assets updates •Change requests •Project management plan updates •Project documents updates

Control cost tools & techniques: Earned value management EVM: Used method

of performance measurements with three key dimension.

Planned value PV: is the authorized budget assigned to the work to be accomplished.

Earned value EV: is the value of work performed

Actual costs AC: the actual cost actually incurred & recorded in accomplishing work performed .

Earned value management formulas:

Schedule variance SV = EV – PV

Cost variance CV = EV – AC

Schedule performance index SPI = EV/PV

Cost performance index CPI= EV/AC

SV (-ve , behind schedule - +ve , ahead of schedule)

CV (-ve, over budget - +ve , under budget)

example10 building in 10 months (each cost is 1

million)At the fifth monthPV = 5 mEV = 7 m (7 building)AC = 8 m

SV = EV - PV = 7-5 = 2 (ahead of schedule)CV= EV - AC = 7-8 = -1 (over budget)

Forecasting: forecast for the estimate at completion EAC

EAC = AC + ETC

Variance at completion VAC = BAC – EAC

Performance reviews: reviews to compare performance over time.

Project management software

Control costs outputsWork performance measurements.

Budget forecasts

Change requests

Organizational process assets update

Project management plan updates

Project document updates.

Thanks