PROJECT

Project management plan

Cost management plan

We have to know in advance the cost of the project and ensure it stays within the budget
Cost management plan

3 processes
Planning and monitoring & controlling process groups
Cost management plan

Process of forecasting what each project activity will cost

Includes UR and physical resources (material, equipment)
Cost management plan

Process of adding up the estimated cost for each activity to et an estimated budget
Provides a cost baseline against which you can monitor actual costs
Cost management plan

Process of keeping actual costs and the planned budget in line

Involves influencing factors that cause costs variance
Keeps an eye on cost trends and anticipating cost of work
Cost management plan

Outputs from one process becomes input for the next one
As you monitor and control costs, you may need to return to estimate costss and determine budget
processes (iterative)
Cost management plan

The cost mgt plan guides all 3 of the project cost mgt processes
Cost management plan

The project mgt plan sets out to establish the following:

Cost management plan
Cost estimate

Estimate cost is a critical step

Forces you to be realistic
Helps you stick to the budget when the project underway
Cost estimate
Cost estimate

Cost estimates usually defined in terms of currency. However, other units can be used (staff hours)
Cost estimate

Cost estimates is progressive

Continue refining costs estimates as more info becomes available
Cost estimate

2 main benefits of cost estimation

Project sponsor needs to identify the funding requirements before deciding to grant funding
Baseline contains estimates costs of the resource a project will use. Baseline enable PM to monitor
and control costs as work progress
Cost estimate

4 inputs from other project mgt knowledge areas

Scope baseline describes the work required to complete the project: 3 components
Cost estimate

Each work package in the WBS provide the basis for cost estimation
Cost estimate

In WBS dictionary every components of the WBS is describe in details you need to estimate costs
Cost estimate

The project scope statement helps keep in mind the project’s business objectives, product scope,
strategies, constraints, assumptions
Cost estimate

The project schedule contains the planned dates for performing schedule activities and info about when
resources are needed, when and for how long
Enables to estimate resource costs for staff, material, equipment and location resources
Cost estimate

HT plan describes the staff requirements for a project

Enable to estimate staff numbers and their salaries
Need to consider costs of staff training, rewards, meals, …
Cost estimate

Risk register identifies each risk, its causes, severity, likelihood and impact
Risks usually modify duration and cost of an activity
Cost estimate

Everything from corporate culture to government regulations

Cost estimate

Organisation process assets another input with:

Cost estimate
Cost estimate

Tools and techniques help producing accurate and realistic estimates

Cost estimate

Use costs of a previous project to forecast the ones for a current project
Projects must be similar
Needs expert judgment to refine past info
Must be used with other techniques and require industry experience
Cost estimate

Powerful technique to forecast costs using parameters related to scope, product, resources info, …
Cost estimate

Involves making separate estimates of the cost for each work package in the WBS
To estimate the work package cost, breakdown it down into its detailed activities
Cost estimate

Technique to establish a cost or contingency reserve for the project

Cost estimate

Associated with conforming to a project’s quality requirements

Includes cost of failure and cost of rework
Cost estimate

Includes project mgt estimating SW: spreadsheet, simulation model, …

Cost estimate

Compare the various quotes in order to arrive at a market related cost estimate
Cost estimate

Contact colleagues for their knowledge and past experience

Cost estimate

Takes into account the amount of risk in the original estimate

Compute the best, the worst and the likely case
Assign weights and the denominator is the sum of the weights
Cost estimate
Cost estimate

Good cost estimate; be precise, anticipating possible changes and clarify the reasons for your decision
to others
3 outputs
Cost estimate

Quantitative valuation of how much resources cost to complete project activities

Depends on factors; cost of material, equipment, labor, service, facilities and contingency reserve and
impose funding requirements
Presented in detail
Cost estimate

Detailed explanation of the factors on which each activity/ cost estimates is based
Indicates how confident you are about the estimates
Cost estimate

It may include:
Cost estimate

Update ant project documents affected by these costs or info you gained during this process
Cost estimate

Become input for the determine budget process

Any weakness in the estimate costs will affect the budget
Cost estimate
Cost management plan

Convert estimated costs of each project activity into a realistic cost performance baseline
Determine what funds will be needed and when to complete each aspect of a project
It becomes the reference against which you measure and control actual cost
Cost management plan

Budget includes contingency reserves (anticipated but unknown costs)

From cost baseline
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
Cost management plan
• EV formulas summary
Cost management plan – Exercice 0
Status date: End of week 2
Due date

Task 1 Task 3 Task 5

2 weeks 4 weeks 6 weeks
$15,000 $37,000 $60,000

Task 2 Task 4
2 weeks 2 weeks
$5,000 $3,000

Progress

Week 2 3 6 9 12
Cost management plan – Exercice 0
• A status is taken at the end of the week 2 for a 12 week project.
• The total planned budget for the project is $120000 for work that is evenly spread over
12 weeks.
• The project staff has completed work that was scheduled to have been completed by
halfway through the middle of week 2.
• Actual costs incurred to date on this project $16000.

• 1 – A project initiation, what was the total projected cost of this project? BAC
• 2 – What is the earned value of this project on the status date? EV
• 3 – On the status date, what is the budgeted cost of work scheduled? PV
• 4 – Calculate the cost variance CV and the cost performance index CPI
• 5 – Calculate the schedule variance SV and the schedule performance index SPI
• 6 – Compute the “optimistic” (only CPI) and “pessimistic” (with SPI and CPI) EAC and TCI
Cost management plan – Exercice 1
Status date: End of second quater
Due date

Task 1 Task 2
10 weeks 16 weeks
$40,000 $22,000

Task 8
Task 3 Task 4 20 weeks
10 weeks 16 weeks $90,000
$30,000 $24,000

Task 5 Task 6 Task 7

8 weeks 8 weeks 16 weeks
$28,000 $17,000 $38,000

Quarter 1 2 3 4
Cost management plan – Exercice 1
• Plan at end of second quarter
• Tasks 1,3,5 and 6 should be completed
• Tasks 2 and 4 should be 96 percent completed
• Task 7 should be 51 percent completed
• Results at end of the second quarter
• Task 1,3,5 and 6 have been completed
• Task 2 is 50 percent complete
• Task 4 has not been started
• Task 7 is 10 percent complete
• $137,500 has been charged to the project

• 1 – A project initiation, what was the total projected cost of this project? BAC
• 2 – On the status date, what is the budgeted cost of work scheduled? PV
• 3 – What is the actual cost of this project on the status date? AC
• 4 – What is the earned value of this project on the status date? EV
• 5 – Calculate the cost variance CV and the cost performance index CPI
• 6 – Calculate the schedule variance SV and the schedule performance index SPI
• 7 – Compute the “optimistic” and “pessimistic” (with SPI and CPI) estimate at completion
EAC
Cost management plan – Exercice 2
Status date: End of second quater
Due date

Task 1 Task 2
10 weeks 16 weeks
$40,000 $22,000

Task 8
Task 3 Task 4 20 weeks
10 weeks 16 weeks $90,000
$30,000 $24,000

Task 5 Task 6 Task 7

8 weeks 8 weeks 16 weeks
$28,000 $17,000 $38,000

Quarter 1 2 3 4
Cost management plan – Exercice 2
• Assume the following project is being prepared for progress review at the end of 3rd
quarter
• According to the budget baseline, all tasks should be completed except task 8 which should be about 30%
complete at this time
• The project manager reports, however, that all task are finished except the last one which is 50 percent complete
• The Actual costs to date total $240000 compute the following:
• BAC
• PV
• EV
• AC
• CV and CPI
• SV and SPI
• ETC and EAC
• TCPI