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
