2. Coincides with PMBOK 7.2
Process Group and Knowledge Area Mapping
Knowledge Areas Initiating Planning Process Group Executing Process Group Monitoring and Controlling Process Group Closing Process Group
4. Project Integration
Management
4.1 Develop Project Charter
4.2 Develop Project Management
Plan
4.3 Direct and Manage Project Work
4.4 Manage Project Knowledge
4.5 Monitor and Control Project Work
4.6 Perform Integrated Change Control
4.7 Close Project or Phase
5. Project Scope
Management
5.1 Plan Scope Management
5.2 Collect Requirements
5.3 Define Scope
5.4 Create WBS
5.5 Validate Scope
5.6 Control Scope
6. Project Schedule
Management
6.1 Plan Schedule Management
6.2 Define Activities
6.3 Sequence Activities
6.4 Estimate Activity Durations
6.5 Develop Schedule
6.6 Control Schedule
7. Project Cost Management
7.1 Plan Cost Management
7.2 Estimate Costs
7.3 Determine Budget
7.4 Control Costs
8. Project Quality
Management
8.1 Plan Quality Management 8.2 Manage Quality 8.3 Control Quality
9. Project Resource
Management
9.1 Plan Resource Management
9.2 Estimate Activity Resources
9.3 Acquire Resources
9.4 Develop Team
9.5 Manage Team
9.6 Control Resources
10. Project Communications
Management
10.1 Plan Communications
Management
10.2 Manage Communications 10.3 Monitor Communications
11. Project Risk
Management
11.1 Plan Risk Management
11.2 Identify Risks
11.3 Perform Qualitative Risk Analysis
11.4 Perform Quantitative Risk
Analysis
11.5 Plan Risk Responses
11.6 Implement Risk Responses 11.7 Monitor Risks
12. Project Procurement
Management
12.1 Plan Procurement Management 12.2 Conduct Procurements 12.3 Control Procurements
13. Project Stakeholder
Management
13.1 Identify Stakeholders 13.2 Plan Stakeholder Engagement
13.3 Manage Stakeholder
Engagement
13.4 Monitor Stakeholder Engagement
Estimate Costs
3. What is it?
Estimate Costs is the process of developing an approximation of the
cost of resources needed to complete project work.
Why?
The key benefit of this process is that it determines the monetary
resources required for the project.
Coincides with PMBOK 7.2
Estimate Costs
4. Overview
• A cost estimate is a quantitative assessment (and prediction) of the
likely costs for resources required to complete the activity.
• Cost trade-offs and risks should be considered, such as make versus
buy, buy versus lease, and the sharing of resources to achieve
optimal costs for the project.
• The accuracy of a project estimate will increase as the project
progresses through the project life cycle
• Costs are estimated for all resources that will be charged to the
project such as labour, materials, equipment, services, and facilities
and more.
• Cost estimates may be presented at the activity level or in summary
form.
Coincides with PMBOK 7.2
Estimate Costs
5. Estimate Costs
Coincides with PMBOK 7.2
Inputs Tools & Techniques Outputs
1. Project management plan
• Cost management plan
• Quality management plan
• Scope baseline
2. Project documents
• Lessons learned register
• Milestone list
• Project schedule
• Resource requirements
• Risk register
3. Enterprise environmental factors
4. Organizational process assets
1. Expert judgment
2. Analogous estimating
3. Parametric estimating
4. Three-point estimating
5. Bottom-up estimating
6. Data analysis
• Alternatives analysis
• Reserve analysis
• Cost of quality
7. Project Management
Information System
8. Decision making
• Voting
1. Cost estimates
2. Basis of estimates
3. Project documents updates
• Assumption log
• Lessons learned register
• Risk register
Inputs, Tools & Techniques, Outputs
7. Estimate Costs - Inputs
Coincides with PMBOK 7.2
Project Management Plan
Project management plan components include:
• Cost management plan
• Quality management plan
• Scope baseline (includes the project scope statement, WBS, and WBS dictionary)
8. Coincides with PMBOK 7.2
Project Documents
Project documents that can be considered as inputs for this process
include:
• Lessons learned register
• Project schedule
• Resource requirements
• Risk register
Estimate Costs - Inputs
9. Enterprise Environmental Factors
The enterprise environmental factors that can influence the Estimate
Costs process include :
• Market conditions
• Published commercial information
• Exchange rates and inflation
Coincides with PMBOK 7.2
Estimate Costs - Inputs
10. Organisational Process Assets
The organizational process assets that can influence the Estimate Costs
process include:
• Cost estimating policies
• Cost estimating templates,
• Historical information and lessons learned repository
Coincides with PMBOK 7.2
Estimate Costs - Inputs
11. Estimate Costs – Tools & Techniques
Coincides with PMBOK 7.2
Expert Judgement
Expertise should be considered from individuals or groups with
specialized knowledge or training in the following topics:
• Previous similar projects
• Information in the industry, discipline, and application area
• Cost estimating methods.
12. Coincides with PMBOK 7.2
Analogous Estimating
Analogous cost estimating uses values, or attributes, of a previous project
that are similar to the current project. Values and attributes of the
projects may include but are not limited to: scope, cost, budget, duration,
and measures of scale (e.g., size, weight). Comparison of these project
values, or attributes, becomes the basis for estimating the same
parameter or measurement for the current project.
Estimate Costs – Tools & Techniques
13. Coincides with PMBOK 7.2
Parametric Estimating
Parametric estimating uses a statistical relationship between relevant
historical data and other variables (e.g., square footage in construction)
to calculate a cost estimate for project work. This technique can produce
higher levels of accuracy depending on the sophistication and underlying
data built into the model.
Estimate Costs – Tools & Techniques
14. Coincides with PMBOK 7.2
Bottom-Up Estimating
Bottom-up estimating is a method of estimating a component of work.
The cost of individual work packages or activities is estimated to the
greatest level of specified detail. The detailed cost is then summarized or
“rolled up” to higher levels for subsequent reporting and tracking
purposes.
Estimate Costs – Tools & Techniques
15. Coincides with PMBOK 7.2
Three Point Estimating
Using three-point estimates helps define an approximate range for an activity’s cost:
• Most likely (cM)
• Optimistic (cO)
• Pessimistic (cP)
Depending on the assumed distribution of values within the range of the three
estimates, the expected cost, cE, can be calculated. One commonly used formula is
triangular distribution:
Triangular distribution. cE = (cO + cM + cP) / 3
Beta distribution. cE = (cO + 4cM + cP) / 6
Estimate Costs – Tools & Techniques
16. Coincides with PMBOK 7.2
Data Analysis
Data analysis techniques that can be used for this process include:
• Alternatives analysis
• Reserve analysis
• Cost Analysis
Estimate Costs – Tools & Techniques
17. Coincides with PMBOK 7.2
Project Management Information System
Estimate Costs – Tools & Techniques
The project management information system can include spreadsheets,
simulation software, and statistical analysis tools to assist with cost
estimating. Such tools simplify the use of some cost-estimating techniques
and thereby facilitate rapid consideration of cost estimate alternatives.
18. Coincides with PMBOK 7.2
Decision Making
Estimate Costs – Tools & Techniques
Decision Making Process includes:
• Voting
• Autocratic decision making
• Multicriteria decision analysis
19. Coincides with PMBOK 7.2
Cost Estimates
Cost estimates include quantitative assessments of the probable costs required to
complete project work, as well as contingency amounts to account for identified risks,
and management reserve to cover unplanned work. Cost estimates can include:
• Direct labour
• Materials
• Equipment
• Services
• Facilities
• information technology
• Other special categories
• Indirect Costs
Estimate Costs – Outputs
20. Coincides with PMBOK 7.2
Basis of Estimates
The amount and type of additional details supporting the cost estimate vary by
application area. Supporting documentation should provide a clear and complete
understanding of how the cost estimate was derived. Details may include:
• Documentation of the basis of the estimate (i.e., how it was developed),
• Documentation of all assumptions made,
• Documentation of any known constraints,
• Documentation of identified risks included when estimating costs,
• Indication of the range of possible estimates
• Indication of the confidence level of the final estimate.
Estimate Costs – Outputs
21. Coincides with PMBOK 7.2
Project Document Updates
Project documents that may be updated as a result of carrying out this
process include:
• Assumption Log
• Lessons Learned Register
• Risk Register
Estimate Costs – Outputs
Editor's Notes
Cost estimates include the identification and consideration of costing alternatives to initiate and complete the project. Cost trade-offs and risks should be considered, such as make versus buy, buy versus lease, and the sharing of resources in order to achieve optimal costs for the project.
Cost estimates are generally expressed in units of some currency (i.e., dollars, euros, yen, etc.), although in some instances other units of measure, such as staff hours or staff days, are used to facilitate comparisons by eliminating the effects of currency fluctuations.
Cost estimates should be reviewed and refined during the course of the project to reflect additional detail as it becomes available and assumptions are tested. The accuracy of a project estimate will increase as the project progresses through the project life cycle.
Costs are estimated for all resources that will be charged to the project. This includes but is not limited to labor, materials, equipment, services, and facilities, as well as special categories such as an inflation allowance, cost of financing, or contingency costs. Cost estimates may be presented at the activity level or in summary form.
The cost management plan describes estimating methods that can be used and the level of precision and accuracy required for the cost estimate.
The quality management plan describes the activities and resources necessary for the project management team to achieve the quality objectives set for the project.
Scope Baseline
The scope statement reflects funding constraints by period for the expenditure of project funds or other financial assumptions and constraints.
The WBS provides the relationships among all the project deliverables and their various components.
The WBS dictionary and related detailed statements of work provide an identification of the deliverables and a description of the work in each WBS component required to produce each deliverable.
Lessons learned earlier in the project with regard to developing cost estimates can be applied to later phases in the project to improve the accuracy and precision of the cost estimates.
The Project schedule includes the type, quantity, and amount of time that team and physical resources will be active on the project. The duration estimates The schedule also provides useful information for projects that incorporate the cost of financing (including interest charges).
Resource requirements identify the types and quantities of resources required for each work package or activity.
The risk register contains details of individual project risks that have been identified and prioritized, and for which risk responses are required.
Market conditions - These conditions describe what products, services, and results are available in the market, from whom, and under what terms and conditions. Regional and/or global supply and demand conditions greatly influence resource costs.
Published commercial information - Resource cost rate information is often available from commercial databases that track skills and human resource costs, and provide standard costs for material and equipment. Published seller price lists are another source of information.
Exchange rates and inflation - For large-scale projects that extend multiple years with multiple currencies, the fluctuations of currencies and inflation need to be understood and built into the Estimate Cost process.
Parametric cost estimates can be applied to a total project or to segments of a project, in conjunction with other estimating methods.
The cost and accuracy of bottom-up cost estimating are typically influenced by the size or other attributes of the individual activity or work package.
Most likely (cM). The cost of the activity, based on realistic effort assessment for the required work and any predicted expenses.
Optimistic (cO). The cost based on analysis of the best-case scenario for the activity
Pessimistic (cP). The cost based on analysis of the worst-case scenario for the activity.
Alternatives analysis is a technique used to evaluate identified options in order to select which options or approaches to use to execute and perform the work of the project. An example would be evaluating the cost, schedule, resource, and quality impacts of buying versus making a deliverable.
Reserve analysis. Cost estimates may include contingency reserves (sometimes called contingency allowances) to account for cost uncertainty. Contingency reserves are the budget within the cost baseline that is allocated for identified risks. Contingency reserves are often viewed as the part of the budget intended to address the known- unknowns that can affect a project
Cost of quality. Assumptions about costs of quality may be used to prepare the estimates. This includes evaluating the cost impact of additional investment in conformance versus the cost of nonconformance. It can also include looking at short-term cost reductions versus the implication of more frequent problems later on in the product life cycle.
Other Special Categories - such as cost of financing (including interest charges), an inflation allowance, exchange rates, or a cost contingency reserve. Indirect costs, if they are included in the project estimate, can be included at the activity level or at higher levels.
Assumption log - During the Cost Estimates process, new assumptions may be made, new constraints may be identified, and existing assumptions or constraints may be revisited and changed. The assumption log should be updated with this new information.
Lessons learned register - The lessons learned register can be updated with techniques that were efficient and effective in developing cost estimates.
Risk register - The risk register may be updated when appropriate risk responses are chosen and agreed upon during the Estimate Cost process.
