PMP Preparation Training,Cost Management,Chapter7,Project Cost Management,Resource Planning Cost Estimating Cost Budgeting Cost Control,Processes required to ensure the project is completed within the approved budget,Cost Management,7.1 Resource Planning,Planning,7.3 Cost Budgeting,7.4 Cost Control,Controlling,7.2 Cost Estimating,Resource Planning,Determining physical resources needed (i.e., material, equipment, and people) and what quantities of each should be used and when they would be needed to perform project activities,Resource Planning,Inputs Scope statement WBS Resource pool description Organizational policies Historical information Activity durations estimates,Tools & Techniques Expert judgment Alternatives identification PM software,Outputs Resource requirements,Inputs,Work breakdown structure (WBS) Identifies the project elements that require resources Historical information Used to identify the types of resources that were required for similar work on previous projects Scope statement Contains project justification and the project objectives, which need to be considered Resource pool description Description of resources available, if necessary, to work on a project Organizational policies Of the performing organization, regarding staffing and the rental and purchase of supplies and equipment Activity duration estimates,Resource Planning,Tools & Techniques,Expert judgment Expertise, provided by any group or individual, used to assess the inputs to this process Other units within organization Consultants Professional and technical associations Industry groups Alternatives identification PM software Used to organize resource pools, define resource availabilities and rates, and define resource calendars,Resource Planning,Outputs,Resource requirements Description of the types (e.g., skill levels) and numbers of resources required by each element of the WBS,Resource Planning,Cost Estimating,Difference between cost estimating and pricing: Cost estimating: Assessing how much it will cost the organization to provide the product or service Pricing: Assessing how much the organization will charge for the product or service Cost estimating also includes identifying and considering cost alternatives,Process of developing an approximation (or estimate) for the cost of the resources necessary to complete the project activities,Cost Estimating,Inputs WBS Resource requirements Resource rates Activity duration estimates Estimating publications Historical information Chart of accounts Risks,Tools & Techniques Analogous estimating Parametric modeling Bottom-up estimating Computerized tools Other cost estimating methods,Outputs Cost estimates Supporting detail Cost management plan,Inputs,WBS Used to organize the cost estimates and to ensure that the cost of all identified work has been estimated Resource requirements Resource rates Unit rates for each resource Activity duration estimates Affects cost estimates if project budget includes an allowance for the cost of financing (i.e., interest) Chart of accounts Coding structure used by the organization to report financial information. Cost estimates must be assigned to the correct accounting category.,Cost Estimating,Inputs (cont.),Historical information Information on the cost of resources Project files Records of previous project results that are detailed enough to aid in developing cost estimates Commercial cost-estimating databases Historical information available commercially Project team knowledge Estimating publications Commercially available data on cost estimating Risks Since risks can have a significant impact on cost, the effect of risk on the cost estimates for each activity must be considered,Cost Estimating,Tools & Techniques,Analogous estimating (Expert judgment) Used to estimate total project costs if there is a limited amount of detailed information Parametric modeling Using project characteristics (or parameters) in a mathematical model to predict costs (e.g., price per square foot) Bottom-up estimating Estimating the cost of individual work items and then rolling up the costs to arrive at a project total Computerized tools PM software and spreadsheets,Cost Estimating,Outputs,Cost estimates Quantitative assessments of the cost of resources (e.g., units of currency or staff hours) Types of estimates Order of magnitude (-25% / +75%) Budget estimate (-10% / +25%) Definitive estimate (-5% / +10%) Supporting detail Description of estimated scope of work Documentation of the basis for the estimate Documentation of any assumptions made Range of possible results,Cost Estimating,Outputs (cont.),Cost management plan Describes how cost variances will be managed Part of the overall project plan,Cost Estimating,Cost Budgeting,Allocating the overall cost estimate to individual activities or work packages, in order to establish a cost baseline for measuring project performance,Cost Budgeting,Inputs Cost estimates