The Importance of Project Cost Management

Overrun is the additional percentage or dollar amount by which actual costs exceed estimates.

The main output of the planning cost management process process is a cost management plan. Planning cost management involves determining the policies, procedures, and documentation that will be used for planning, executing, and controlling project cost.

Basic Principles of Cost Management

IT project managers must be able to present and discuss project information both in financial and technical terms.

Intangible costs or benefits are difficult to measure in monetary terms. Conversely, tangible costs or benefits can easily be measured in dollars.

Management reserves allow for future situations that are unpredictable. For example, if a project manager gets sick for two weeks or an important supplier goes out of business, management reserves could be set aside to cover the resulting costs.

Contingency reserves allow for future situations that may be partially planned for. They are sometimes called known unknowns.

Life cycle costing helps develop an accurate projection of a project's financial expenses and benefits.

Cash flow analysis is a method for determining the estimated annual costs and benefits for a project.

Planning Cost

In general, a cost management plan includes level of accuracy, organizational procedures links, process descriptions, control thresholds, and rules of performance measurement, among others.

Contingency reserves are included in the project cost baseline. 用于可预测的

Management reserves are not. 用于不可预测的

Project costs, like project schedules, grow out of the basic documents that initiate a project, like the project charter.

Estimating Costs

Types of Cost Estimates: Rough Order of Magnitude, Budgetary, Definitive

A definitive estimate provides an accurate estimate of project costs. It provides details for purchases and estimates actual costs.

Parametric estimating uses project characteristics (parameters) in a mathematical model to estimate project costs.

看书确认一下这句话对不对：

Analogous estimates are also called top-down estimates. Such estimates use the actual cost of a previous, similar project as the basis for estimating the cost of the current project.

Parametric models are most reliable when the historical information used to create the model is accurate, the parameters are readily quantifiable, and the model is flexible in terms of the project’s size.

A budgetary estimate is used to allocate money into an organization’s budget. Budgetary estimates are made one to two years prior to project completion.(另, budgetary estimate 是第二精确的)

Determining the Budget

Determining the budget involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

The main outputs of the cost budgeting process are a cost baseline, project funding requirements, and project documents updates.

The main goal of the cost budgeting process is to produce a cost baseline for measuring projec performance and project funding requirements.

A cost baseline is a time-phased budget that project managers use to measure and monitor cost performance.

Controlling Costs

The project management plan, project funding requirements, work performance data, and organizational process assets are inputs for controlling costs.

Controlling costs involves controlling changes to the project budget. The main outputs of the cost control process are work performance information, cost forecasts, change requests, project management plan updates, project documents updates, and organizational process assets updates.

The formulas for variances and indexes start with EV, the earned value. Variances are calculated by subtracting the actual cost or planned value from EV, and indexes are calculated by dividing EV by the actual cost or planned value.

If the CPI is less than one or less than 100 percent, the project is over budget. On the other hand, if the CPI is greater than one or more than 100 percent, the project is under budget.

The schedule performance index (SPI) is the ratio of earned value to planned value; it can be used to estimate the projected time to complete the project. A schedule performance index of one means the project is on schedule.

Viewing earned value information in chart form helps in visualizing how a project is performing. If the actual cost line is always on or above the earned value line, it indicates that costs are equal to or more than planned.

The ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project of the project or activity is known as the rate of performace(RP).

Earned Value Management(EVM)

Using Project Management Software to Assist In Project Cost Management

Most organizations use software to assist in various activities related to project cost management. Spreadsheets are a common tool for cost estimating, cost budgeting, and cost control.

Q&A

1.简要描述成本管理过程

2.tangible 和 intangible costs.

3.What are the three basic types of cost estimating? Describe each type.

4.Describe three tools used in developing a good cost estimate.

5.挣值管理包含在WBS中的每个活动或总结活动计算三种价值，描述一下

PV AC EV