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7 - PROJECT COST MANAGEMENT

Project Cost Management
5.4 Project
Create Documents
WBS 7.1
Plan Cost
Management
6.6
Develop • Cost
Schedule management 6.4
plan Estimate Activity
• Project schedule Resources
• Scope baseline • Project documents
9.1 updates 7
Plan Human 7.2 11.2
Resource Estimate Identify
Management Costs • Activity cost Risks
estimates
• Human resource
management plan • Enterprise
environmental
factors 12.1
11.2 • Organizational • Basis of Plan Procurement
estimates
Identify process assets Management
Risks
• Risk register
7.3
Determine
Enterprise/ Budget
Organization

Figure 7-5. Estimate costs data Flow diagram

Cost estimates are a prediction that is based on the information known at a given point in time. 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. For example, a project in the initiation phase may have a rough
order of magnitude (ROM) estimate in the range of −25% to +75%. Later in the project, as more information is
known, definitive estimates could narrow the range of accuracy to -5% to +10%. In some organizations, there are
guidelines for when such refinements can be made and the degree of confidence or accuracy that is expected.

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©2013 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition 201

Licensed To: Jorge Diego Fuentes Sanchez PMI MemberID: 2399412
This copy is a PMI Member benefit, not for distribution, sale, or reproduction.