Estimating project budget
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What is Project Cost Management?
Project Cost Management is defined as the process
of planning and controlling the project cost and
budget effectively and efficiently. It defines what costs
are required for each deliverable of the project.
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Cost types
Labor cost
Equipment cost
Cost of supplies
Travel cost
Training cost
Overhead cost, etc.
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Techniques used to estimate project cost
There are some techniques used to estimate a project
cost like: Expert Judgment, Three-Point Estimation,
Reserve Analysis and Cost of Quality.
However, to estimate project cost, formally there are
few main methods (techniques) used as follows:
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Contd.
Analogous Estimating
This estimating technique is based
on expert judgments and information based on similar
previous projects. Where previously done similar
project cost is considered with plus or minus of 20%
for existing project.
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Contd.
Parametric estimating
Past data or record is used to
estimate cost for the current project.
Bottom-up estimating
Once you have defined the scope
of the project, it is the most reliable form of technique.
In this technique, based on WBS, you estimate the cost
for each resource or deliverables.
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Project Budget Planning
The main purpose of this activity is to allocate and
authorize the monetary resources required to
complete the project. The main output for
determining the budget includes cost performance
baseline.
The inputs for determining budget includes
following Project management budgeting methods:
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Contd.
Activity cost estimates
Basis for estimates
Scope baseline
Project Schedule
Resource calendars
Contracts
Organizational process assets
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project scheduling process.
The project budgeting is performed in parallel with the
project scheduling process. It is highly dependent on
three component –
Cost estimation
Task durations
Allocated resources
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Contd.
During project budgeting and costing, project
manager communicates with different people
responsible for managing the work efforts as well as
estimating project costs.
He will use various project prospects like work
breakdown structure of the project, the cost estimates,
historical data and records, resource information, and
policies.
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Project Quality Management Plan
( 1 ) Plan Quality
Plan Quality process involves identifying
which standard quality are relevant to the project and
how to fulfill them. It also includes identifying quality
metrics and standard measures for project processes,
regulatory compliance requirements, product
functionality, documentation, etc.
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inputs
The inputs of the plan quality management includes
Project management plan
Stakeholder register
Risk register
Requirements documentation
Enterprise environmental factors
Organizational process assets
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outputs
The output for the quality management is
Quality management plan
Process improvement plan
Quality metrics
Quality checklists
Project documents updates
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.
( 2 ) Quality Assurance
This stage includes mainly two activity, first analyzing
project quality and improve project quality. It is a
process of auditing the quality requirements and the
results from quality control measurement to ensure
that quality standard is maintained throughout the
process. The input for this will be same as the output
of plan quality management while ,
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output
The output of this process will be
Change request
Project management plan
Project documents updates
Organization process assets updates
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.
( 3 ) Quality Control
This will be conducted to control quality throughout
the project life cycle. It defines how the quality
standard can comply with the defined quality
standards. The output of Quality Assurance will be the
input for Quality Control. While the output will ,
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Contd.
Quality control measurements
Validate changes
Verified deliverables
Work performance information
Change request
Project management plan
Project documents updates
Organizational process assets updates
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Project Human Resource Management
Develop human resource plan
Acquire project team
Develop project team
Manage project team
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Summary
Cost management is the process of planning and
controlling the project cost effectively. Cost budgeting
in project management helps you to record and track
the expenses made after the project.
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