[Video] Summary of Cost Management Processes

Summary of Cost Management in 1:13 Minutes

Complete Mind Map here: Link

Earned Value Management – Elements, Explanations & Calculations

Though 50% of project’s success determined by clear & comprehensive planning, other 50% is with monitoring & controlling project progress. To evaluate project progress, Earned Value Management methods give uniform & consistent unit of measure from start of the project till the end. Great benefit of EVM is its capability to capture time and cost measurements against scope (i.e. WBS elements). Good measurement system should give clear indication of issues – in that way EVM gives early warnings about the project progress & enables manager’s to take necessary action well before closure of the project.

Here I present EVM elements with some explanations & calculation formula.


More on Project Baselines

In the earlier post, I briefed about definition of baseline and what constitutes project baseline. Now, let us review elaborately on this topic.

A schedule baseline is a project schedule developed from the schedule network analysis used to verify lag and lead time of current project activities against approved deadlines (mainly used in schedule control).

The cost baseline is an authorized budget used to estimate, monitor, and control overall cost performance on the project. Generally, in any organization, a project budget authorization & approval happens in staggered manner(unless it is a small project). So, Cost baseline is developed as a summation of the approved budgets by time period & it is typically displayed in the form of an S-curve.

Scope baseline is used to compare current scope with actual approved scope and decide whether a change, corrective action or preventive action is required (mainly used in scope verification process). Typically, approved detailed scope statement, WBS and WBS dictionary are the scope baseline documents for the project.

The quality baseline records the quality objectives of the project. The quality baseline is the basis for measuring and reporting quality performance as part of the performance measurement baseline. All above 3 baselines are input in identifying quality standards to be followed in the project within the project constraints.

Variance is another term related to baseline. During project execution, variances will require re-baselining (of course update on plans too). These variances can include changes to activity timings, changes in availability of resource, and risks. Such variances may affect the project plan or project documents and may require detailed analysis and development of appropriate project management responses. The results of the analysis can trigger change requests that, if approved, may modify the project management plan or other project documents and possibly require establishing new baselines.

Stakeholders requirements should be clearly understood and need to be incorporated into different plans before these are base-lined.

What are Project Baselines?

A baseline is used to perform analysis to find current performance against to the expected level for a specific activity in established time-phase.

In Project Management, Baseline refers to the accepted and approved plans & their related documents. Project baselines are, generally, approved by project management team and those are used to measure and control of project activities.

Though baselines are outputs of planning stage, but they are referred and updated during executing & monitoring and controlling process groups.

Baselines give the project manager a best way to understand project progress (by analyzing baseline vs. actual) and forecast the project outcome.

Baselines are important input to number of project processes and outputs of many processes raise change request to these baselines.

Project baselines include, but are not limited to:

  • Schedule baseline
  • Cost baseline
  • Scope baseline
  • Quality baseline

Baselines are prepared on triple constraints – Scope, Time, Cost (and Quality) – management areas. All the above are considered as components Project management plan. Often the scope, schedule, and cost baseline will be combined into a performance measurement baseline that is used as an overall project baseline against which project performance can be measured. The performance measurement baseline is used for earned value measurements.

Benchmark, Standard, Guideline and Baseline are different words that are used interchangeably in Management.