Time Management and Cost Management
PMBOK® identifies 10 Knowledge Areas and very clearly explains the processes in each of these areas. One important aspect to consider is how these areas are connected. An example is the relationship between Time Management and Cost Management. The most obvious connection between these two Knowledge Areas is the triple constraint theory which proposes that you cannot change one constraint without creating an impact on the other. For example, the budget is increased in order to reduce the schedule duration. Alternately, an increase in scope may increase both cost and schedule duration.
The main commonality with these two Knowledge Areas is that they share many of the same tools and techniques to create the estimates of both time and cost. In fact, they are both based on the scope baseline which contains the WBS. The WBS is decomposed into small work packages that are able to have a duration and cost assigned.
Estimate Activity Durations (Figure 6-14, PMBOK® 5th ed.)
Estimate Costs (Figure 7-4, PMBOK® 5th ed.)
Another inseparable commonality is the Control Process which uses Earned Value Management (EVM). Based on the time phased budget, the project manager calculates SV (Schedule Variance), CV (Cost Variance), SPI (Schedule Performance Index), and CPI (Cost Performance Index). When used in conjunction with the VAC (Variance At Completion) metric, the project manager may decide on specific actions. For example, if a project is expected to be completed well under budget but late to the required end date then the project manager might add more resources at additional cost in order to improve the schedule.
It is helpful to consider cost and time together for estimating project activities and for monitor and control. When a project manager takes action to change one constraint, it is wise to understand the impact on the others.
Sample Question (the answer is below)
The project manager is having difficulty estimating the cost for the second phase of the project. The cost needs to be included in the budget by the end of the day. The project manager finds a previous similar project and gathers the data. Based on the analogous method of estimating the project manager will:
a) use a top down approach
b) evaluate the cost for each WBS package then summarize the total cost
c) use the component values from the previous project and calculate a new cost
d) use a percentage of the cost from the previous project to include in the budget
The answer is d). See PMBOK® 5th ed. page 204, section 220.127.116.11.
"...this technique relies on the actual cost of a previous, similar project as the basis for estimating the cost of the current project."
Process Group: PLANNING
Knowledge Area: COST