You now- have an exhaustive breakdown of project activities, and you have some pretty good duration estimates. Now the question that's forever on the mind of the executive management staff: How much is it going to cost? The purpose of the Cost Estimating process is to answer that question.
Every project has a budget, and part of completing a project successfully is completing it within the approved budget. Sometimes project managers arc not responsible for the budget portion of the project. This function is assigned instead to a functional manager who is responsible for tracking and reporting all the project costs. I believe project mangers will have more and more responsibility in this area as the project management discipline evolves. Keep in mind that if you, as the project manager, don't have responsibility for the project budget, your performance evaluation for the project should not include budget or cost measurements.
Before we dive into the Cost Estimating and Cost Budgeting process particulars, you should know that these processes arc governed by a cost management plan that is created when you perform the Project Management Plan process. Just like the schedule management plan, the cost management plan isn't developed during these processes and it isn't an output of any of the Cost processes. There arc a couple of things you should know about this plan for the exam. Like all the other management plans, it's a subsidiary of the project management plan. According to A Guide to the PMBOK, some of the elements of this plan include, but aren't limited to, the following:
■ Precision levels, or the rounding you'll use for project costs (hundreds, thousands, and so on)
■ Units of measure for resources such has hours for staff resources and hourly rates for contractor staff
■ Control account links so that cost estimates for WBS elements can be linked directly to the accounting system
■ Variance thresholds for costs
■ Earned value rules (We'll talk about this in the tools and techniques section.)
■ Reporting formats
■ Process descriptions
As with time estimates, the work breakdown structure (WBS) is the key to determining accurate cost estimates. The Cost Estimating process develops a cost estimate for the resources (human and material) required for each schedule activity. This includes weighing alternative options and examining trade-offs.
Every project has a budget, and part of completing a project successfully is completing it within the approved budget. Sometimes project managers arc not responsible for the budget portion of the project. This function is assigned instead to a functional manager who is responsible for tracking and reporting all the project costs. I believe project mangers will have more and more responsibility in this area as the project management discipline evolves. Keep in mind that if you, as the project manager, don't have responsibility for the project budget, your performance evaluation for the project should not include budget or cost measurements.
Before we dive into the Cost Estimating and Cost Budgeting process particulars, you should know that these processes arc governed by a cost management plan that is created when you perform the Project Management Plan process. Just like the schedule management plan, the cost management plan isn't developed during these processes and it isn't an output of any of the Cost processes. There arc a couple of things you should know about this plan for the exam. Like all the other management plans, it's a subsidiary of the project management plan. According to A Guide to the PMBOK, some of the elements of this plan include, but aren't limited to, the following:
■ Precision levels, or the rounding you'll use for project costs (hundreds, thousands, and so on)
■ Units of measure for resources such has hours for staff resources and hourly rates for contractor staff
■ Control account links so that cost estimates for WBS elements can be linked directly to the accounting system
■ Variance thresholds for costs
■ Earned value rules (We'll talk about this in the tools and techniques section.)
■ Reporting formats
■ Process descriptions
As with time estimates, the work breakdown structure (WBS) is the key to determining accurate cost estimates. The Cost Estimating process develops a cost estimate for the resources (human and material) required for each schedule activity. This includes weighing alternative options and examining trade-offs.