Week 4 Project

Project Budget and Costing

Budgets are ubiquitous to all kinds of management. No matter what industry, type of organization, or professional discipline a manager may be involved with, budgeting is

an integral part.

While discussing the traditional value-added tools that project management has brought to the general management toolkit, Meredith and Mantel (2009) advocate the

use of adopting general budgeting and cost estimation techniques to the needs of project environments.

In contrast, a few differences stand out in PMBOK® Guide. Project cost management follows project time management. In other words, the implication is that budgeting

and cost estimation are accomplished after the schedule is made. This makes logical sense. Looking closely at the sequence of processes in the PMBOK® Guide, you will

see it is best to estimate the costs of the individual activities after activities are listed, sequenced, and scheduled. This is close to a bottom-up budgeting technique.

An appropriate example of a top-down process is summary budget which is developed during the planning process. In this case, it is perfectly likely for an overall budget

to be present by the time scheduling starts. Some of the most major project management methods occur in iterative fashion. The sequence in the PMBOK® Guide is

probably the most logical, but reality does not always allow managers to use perfect logic.

PMBOK® Guide provides several speci�c tools in addition to what's in the textbook. Tool include analogous estimating, resource costs rates, parametric estimating,

vendor bid analysis, reserve analysis, cost of quality, cost aggregation, and funding limit reconciliation. The supplemental media provide descriptions of these tools.

Additional Materials

View a Pdf Transcript of Project Management: Tools and Techniques. (media/week4/SU_MGT3035_W4_L3_G1.pdf?

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