Chapter 7 PM

ROM estimate

A cost estimate prepared very early in the life of a project to provide a rough idea of what a project will cost

definitive estimate

A cost estimate that provides an accurate estimate of project costs

budgetary estimate

A cost estimate used to allocate money into an organization's budget

bottom-up estimates

A cost-estimating technique based on estimating individual work items and summing them to get a project total

parametric estimating

A cost-estimating technique that uses project characteristics (parameters) in a mathematical model to estimate project costs

analogous estimates

A cost-estimating technique that uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project; also called top-down estimates

cash flow analysis

A method for determining the estimated annual costs and benefits for a project

EVM (earned value management)

A project performance measurement technique that integrates scope, time, and cost data

cost baseline

A time-phased budget that project managers use to measure and monitor cost performance

earned value

An estimate of the value of the physical work actually completed

EAC (estimate at completion)

An estimate of what it will cost to complete the project based on performance to date

intangible costs or benefits

Costs or benefits that are difficult to measure in monetary terms

tangible costs or benefits

Costs or benefits that can be easily measured in dollars

indirect costs

Costs that are not directly related to the products or services of the project, but are indirectly related to performing the project

direct costs

Costs that can be directly related to creating the products and services of the project

management reserves

Dollar amounts included in a cost estimate to allow for future situations that are unpredictable (sometimes called unknown unknowns)

known unknowns

Dollar amounts included in a cost estimate to allow for future situations that may be partially planned for (sometimes called contingency reserves) and that are included in the project cost baseline

contingency reserves

Dollar amounts included in a cost estimate to allow for future situations that may be partially planned for (sometimes called known unknowns) and that are included in the project cost baseline

reserves

Dollar amounts included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict

sunk cost

Money that has been spent in the past

profits

Revenues minus expenses

overrun

The additional percentage or dollar amount by which actual costs exceed estimates

cost variance

The earned value minus the actual cost

schedule variance

The earned value minus the planned value

baseline

The original project plan plus approved changes

budget at completion

The original total budget for a project

planned value

The portion of the approved total cost estimate planned to be spent on an activity during a given period

project cost management

The processes required to ensure that the project is completed within the approved budget

profit margin

The ratio between revenues and profits

rate of performance

The ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity

cost performance index

The ratio of earned value to actual cost; can be used to estimate the projected cost to complete the project

SPI (schedule performance index)

The ratio of earned value to planned value; can be used to estimate the projected time to complete a project

life cycle costing

The total cost of ownership, or development plus support costs, for a project

actual cost

The total of direct and indirect costs incurred in accomplishing work on an activity during a given period

Determining the budget

involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance The main outputs of the cost budgeting process are a cost baseline, project funding requirements, and project documents updates.

Controlling costs

involves controlling changes to the project budget The main outputs of the cost control process are work performance information, cost forecasts, change requests, project management plan updates, project documents updates, and organizational process assets updates.

Planning cost management

involves determining the policies, procedures, and documentation that will be used for planning, executing, and controlling project cost. The main output of this process is a cost management plan

Estimating costs

involves developing an approximation or estimate of the costs of the resources needed to complete a project The main outputs of the cost estimating process are activity cost estimates, basis of estimates, and project documents updates.

learning curve theory

theory that when many items are produced repetitively, the unit cost of those items normally decreases in a regular pattern as more units are produced