PM I Vorlesung 4

Project Cost Management inludes processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so the project can be completed within the approved budget

Set of processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so the project can be completed within the approved budget

Cost of the resources needed to complete the project activities

Approved estimate for a project or a work package

Project budget includes all funds authorized to execute the project

Number of labor units required to complete an activity or work package, often expressed in person hours, person days, or person month

On some projects, especially those of smaller scope, cost estimating and cost budgeting are tightly linked and can be viewed as a single process

Project should consider project decisions on subsequent recurring costs of using, maintaining, and supporting the product, service, or result of the project, e.g. limiting the number of design reviews reduces the project cost, but could increase the product’s operating costs

Different stakeholders measure prject costs in a different way at different times, e.g.: cost of an acquired item may be measured when the acquisition decision is made, the order is placed, the item is delivered etc.

In many organizations

• predicting and analyzing the prosoective financial performance of the project’s product is performed outside of the project

• exist formal or informal cost estimating and budgeting-related policies, procedures and guidelines - e.g. earned value management used in managing projects

No benefit from detailed cost calculations -> use lightweight estimation methods

Detailed estimated reserved for short-term planning horizons and in just-in-time fashion

Estimate Costs is the process of developing an approximation of the cost or resources needed to complete project work

Determines the monetary resources required for the project

Is periodically performed throughout the project as needed or planned

Performed for all resources that will be charged to the project

• labor: effort cost per labor unit

• material

• equipment

• services

• facilities

• special categories like inflation allowance, cost of financing, contingency costs, conversion rates, taxes etc.

Can be presented at activity level or in summary form at any level of the project work structure

At activity level or in summary form at any level of the project work structure

Either a fixed-date release or a fixed-scope release

Determine who is on the team: Assume that the team composition doesn’t materially change either during a sprint or from sprint to sprint

Determine the sprint length: Assume that all sprints have the same length

Based on team composition and sprint length, determine the personnel costs of running a sprint: This is simple if previous assumptions are true, and only slightly more complicated if the team composition or sprint length fluctuates

Multiply the number of sprints in the release by the cost per sprint: The result is the fixed personnel cost for this release

Multiply both high and low number of sprints by the cost per sprint: The results are the rang of personnel costs associated with the release. One represents the lower amount the release should cost and the other the higher amount it should cost

Determine budget is the process of aggregating the estimated costs of individual activities to establish an authorized cost baseline

Determines the cost baseline against which the project performance can be monitored and controlled

Performed once or at predefined points in the project (usually stage boundaries)

Can lead to rescheduling or changing the approach depending on the funding limits on the commitment of funds for the project

Approved version of the time-phased project budget that includes contingency reserves, but excludes management reserves

Basis for comparison to actual cost

Developed as a summation of the approved budgets for the different schedule activities

Enables time-phase view of the cost baseline, as cost estimated that make up the cost baseline are directly linked to the schedule

Amount of the project budget withheld for management control purposes, reserved for unforeseen work that is within the scope of the project

Intended to address the unknown unknowns

Not included in the cost baseline, but part of the overall project budget

Are added to the cost baseline to produce the project budget

An amount of management reserves can be added to the cost baseline based on a (formal) change

Is the budget within the cost baseline that is allocated for identified risks

Intended to address the known-unknowns that can affect the project, e.g. rework for some project deliverables

Can be provided at any level from the specific activity to the entire project

May be a percentage, a fixed number

Control Costs is the process of monitoring the status of the project to update the project costs and managing changes to the cost baseline

Maintains the cost baseline throughout the project

Performed throughout the project

Monitoring expenditure with regard to the value of work accomplished

Bright expected cost overruns within acceptable limits

Major output of the process: cost forecast

You (i) capture the expenses, (ii) compare them to the plan and (iii) forecast / estimate the remaining necessary costs

In case of deviations (especially overruns) a) find out the reason, b) manage the deviation back on track or, if that’s not possible and has an effect on the total budget, inform the relevant stakeholders. You might need to ask for a budget increase

More effort needed than expected, higher day rates for resources charged than planned, price increase of other resources used etc.