UNDERSTANDING PROJECT COST MANAGEMENT.doc
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UNDERSTANDING PROJECT COST MANAGEMENT.doc

UNDERSTANDINGPROJECTCOSTMANAGEMENT.doc

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UnderstandingProjectCostManagementHYPERLINK"http://blogs.attask.com/understanding-project-cost-management/"\o"12:00am"30November2010-POSTEDbyHYPERLINK"http://blogs.attask.com/author/jessiewarner/"\o"ViewallpostsbyJessieWarner"JessieWarnerSHARETocontinuemyseriesontheHYPERLINK"http://blogs.attask.com/blog/project-management-success/0/0/project-management-knowledge-areas"\o"projectmanagementknowledgeareas"nineprojectmanagementknowledgeareas,Iwouldliketodiscussthetopicofprojectcostmanagement.Costmanagementinvolvesknowingthefinancialandhumanresourcesrequiredtocompleteaprojectwithinanapprovedbudget.ThePMBOKdescribesthreeareasorprocessesforeffectivecostmanagement:EstimateCostsDetermineBudgetControlCostsEstimatingtheCostsThefirststepincostmanagementistoestimatethecostsofeachactivityintheproject.Costsincludebothhumanresourceandphysicalresourcecosts.Becausethisstepoftenoccursintheplanningphase,itisimportanttounderstandthattheestimatedcostsareyour“bestguesses”attheactualcostsofeachactivity.Togetagoodguessatthecostsyoucanuseoneofthefollowingtechniques:AnalogousEstimating:estimatesarebasedonpastprojects.Itusesactualcostsfromasimilarfinishedprojecttoestimatethecostsofthenewproject.Theaccuracyoftheseestimateswilldependonthesimilaritiesbetweenthenewprojectandtheoldproject.ParametricModeling:estimatesarebasedonmathematicalformulas,typicallyfollowingaRegressionAnalysisorLearningCurvemodel.Theaccuracyoftheseestimatesdependsontheassumptionsmade.Bottom-upEstimating:estimatesarebasedonindividualworkitemcostanddurationestimates.Thisinvolvesestimatingthesmallestactivitiesandthenaddingthemuptocreateanestimateforthewholeproject.DeterminingtheBudgetUsingyourbest-guessestimates,thenextstepistocreatearealisticprojectbudget.Inthisstep,youwilldeterminethecostbaselineandthefundingrequirementsfortheproject.Agoodprojectbudgetwillhelpyoumakekeydecisionswithrespecttotheprojectscheduleandresourceallocationconstraints.Todeterminetheprojectbudget,thePMBOKsuggestsusingseveraltech