Cost trade offs and risks must be considered such as

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Unformatted text preview: ts • The process of developing an approximation of the monetary resources needed to complete project activities. • Cost trade-offs and risks must be considered, such as make versus buy, buy versus lease, and the sharing of resources. • The accuracy of a project estimate will increase as the project progresses through project life cycle. Hence cost estimating is an iterative process. • This includes labor, materials, equipment, services, and facilities, as well as special categories such as inflation allowance or contingency costs. 47 7.1 Estimate Costs • Human Resource Plan: includes project staffing attributes, personnel rates, and related rewards/recognition. • Risk register: to consider risk mitigation costs. • _______________ Estimating: uses the values of parameters, such as scope, cost, budget, and duration or measures of scale such as size, weight, and complexity, from a previous, similar project as the basis for estimating the same parameter for a current project. • ________________ Estimating: uses a statistical relationship between historical data and other variables (e.g., square footage in construction) to calculate an estimate for activity parameters, such as cost, budget, and duration. • Three-Point Estimates: (1) most likely (cM), (2) optimistic (cO), and (3) pessimistic (cP). – cE = (cO + 4cM + cP) / 6 • Reserve analysis: include contingency reserves to account for cost uncertainty. May be a percentage of estimated cost or fixed number. 48 7.2 Determine Budget • The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. • Historical relationships: For analogous and parametric estimates, the cost and estimation accuracy can vary widely. The strength of historical relationship should be specified. • Funding Limit Reconciliation: A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. 49 7.2 Determine Budget • Cost Performance Baseline: A time-phased __________________ __________ (BAC)...
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This document was uploaded on 01/28/2014.

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