Cost Managment

Direct Cost -For a project

Resource/Material Cost

Training Cost

Travel Cost

specific infrastructure need to purchase

software licensing cost

Indirect Cost

This is cost for supporting your business, not specific to your project.

Fringe Benfits

General Admin expenses

HR Expenses

Variable Cost

Performance Bonus

Freight Expenses

Sales commision

Fixed Cost

General expenses

rent

depreciation

Estimate Cost Process

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Determine Budget Process

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Reserve Analysis

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Contingency Reserve--- known unknown risk--- generally 10-15 % of proejct cost estimate

Risk Response Budget--- Based on Risk Register- we have planned certain risk response as mitigation strategy , so we need to set aside cost

Management Reserve - generally 10-15 % of proejct cost estimate, this is not accessible for for the PM. This is reserved for unknown unknown risk.

Project Budget= project cost + Contingency Reserve + Risk cost + Management Reserve

Cost Baseline=project cost+continegency reserve

Control Cost Process

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Earn Value Management

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Cost Forecasting (Performance Based)

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Here in this , we are not taking into account performance, we are not considering how much work is left

so we need to consider EV and then calculate ETC as below

above is valid at the start of project, but as project progresses, we need to track changes,need to measure performance.If project performance is a bad, then we need more money to finish the project.so we need to consider performance factor to get ETC formula as below.

performace fctor < 1 , ETC will be more

performace fctor = 1 , no impact on ETC

performace fctor > 1 , ETC will be less, i am doing very well

other formula is

Performance factor may be CPI - cost performance index or SPI- schedule perfrmance index

if Performance factor is CPI - cost performance index

This can not be used thoughout project life cycle

Tips

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As PEr PMI

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SV=40-40=-10

SV is negative, mena project is behind schedule

Cost Forcasting

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