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7 - PROJECT COST MANAGEMENT

construction phase of a predictive life cycle software project and during production of software increments in
an adaptive life cycle software project because working, demonstrable software can be used in both cases as a
measure of progress. However, the intangible nature of other software work products such as requirements, design
documentation, and test plans makes it difficult to measure and report work progress at the level of granularity
required to generate accurate earned value reports on a periodic basis.

7.4.2.2 Forecasting

Desirable attributes of a software development forecasting method include providing credible estimates in
a short amount of time, quickly communicating the need for decisions or actions, and empowering the project
sponsors to choose how the software development funds are to be spent. Earned value tracking, burndown charts,
and cumulative flow diagrams (CFDs) provide indicators of the costs expended to-date on a project and provide
forecasts of project cost at completion. These mechanisms typically report cost in units of labor (i.e., staff-hours)
or in monetary units that account for labor costs plus additional costs.

The information is presented as calculated amounts, but it is the visibility of the charts that is most valuable to
project managers, software teams, and other stakeholders. The charts indicate cumulative progress, how much
effort or money is being expended on the project, and how much remains to be done. This is important because it
represents the amount of effort or money needed to keep the project operational on track regardless of the amount
of work assigned.

A simple calculation of the resources that are needed, the percentage of allocation, and all costs associated
can be placed on the earned value, burndown, or cumulative flow chart. Often there is a major effort to re-estimate
and rebaseline a large project and significant customer discussions may occur concerning scope adjustment
and prioritization or deferral of product features. On smaller projects, it may be simpler to use extrapolation to
determine adjustments to the cost and schedule needed to deliver the desired software functionality. The project
manager and key stakeholder then adjust the functionality to be developed so that it can be completed within the
specified budget and time, or adjust the budget and time, or some combination thereof.

7.4.2.3 To-Complete Performance Index (TCPI)

See Section 7.4.2.3 of the PMBOK Guide.
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7.4.2.4 Performance Reviews

See Section 7.4.2.4 of the PMBOK Guide.
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7.4.2.5 Project Management Software

See Section 7.4.2.5 of the PMBOK Guide.
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136 ©2013 Project Management Institute. Software Extension to the PMBOK Guide Fifth Edition
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