DAY #4 — Project Cost Management & Project Quality Management

In this day as you’ll expect I’ve finished viewing 7+8 videos of the series which are:

  • Project Cost Management.
  • Project Quality Management.

Project Cost Management

  1. Estimate Costs.
  2. Determine Budget.
  3. Control Costs.

Estimate Costs

  • Estimating  Accuracy (+-100% for example). Don’t give a specific number, give a range.
  • Driven from WBS (which is developed in Scope M. using Deliverables and Work Packages).
  • Ensure ALL costs are included (any material, tools, equipments needed to the project…).
  • Determine Schedule impact, Environment impact…
  • Include Risks.

Estimate Methods

  1. Expert Judgments.
  2. Analogous.
  3. Top\Down.
  4. Parametric.
  5. PERT (Best Guess).
  6. Procurement (buying supplies, materials, services…).
  7. Reserve Analysis (Risks, unknown, concerns…)

Determine Budget

  • Aggregate Costs (from previous).
  • Cash Analysis (in big project, done by Finance office).

Control Cost

  • Manage Cost against Budget. (Actuals vs Planned).
  • Earned Value Management.

Earned Value Management (EVM)

In theory it’s the most important tool you have to evaluate our project progress, because it allow us to integrate Scope, Quality and Cost in one single measurement.

Earned Value validate our Current State.

EVM terms

  • Planned Value (PV) = The Approved Budget.
  • Actual Cost (AC) = Current Cost (real live actual number assigned to us by accounting).
  • Earned Value (EV) = Compares Work Performed vs Work Planned.

EV in other words means efficiency, the actual value. How efficient our team is working on the project.

EVM Formulas

Schedule Variance (SV) = EV – PV

Cost Variance (CV) = EV – AC

Schedule Performance Indicator (SPI) = EV/PV

Cost Performance Indicator (CPI) = EV/AC


  • EV always first.
  • Schedule always with AV.
  • Cost always with AC.

Estimate at Complete (EAC) = BAC/CPI

Schedule at Complete (SAC) = Original date/SPI

(BAC=Budget at complete).

Now if Variance + then Good. If Variance – then Bad.

If Indicator >1 then good. If <1 then bad.


Project Quality Management

  1. Plan Quality. (Plan)
  2. Perform Quality Assurance. (Exec)
  3. Perform Quality control. (M & C)

Quality vs. Grade

Quality = Fulfilling Requirements (a car that is doing its job). (Our project has achieved what the business needs).

Grade = Measurement of Functionality (small, medium or luxury car).

Q=Reliable Car. G=Different sizes.

PMI Quality Expectations

  • Customer Satisfaction: delivering what and only what business needs.
  • Prevention over Inspection.
  • Continuous Improvement.
  • Quality is a Management Responsibility.

Plan Quality

  • Define Quality Expectations (hand in hand with Acceptance Criteria).
  • Quality must be built in.
  • Cost of Quality: Cost of Prevention+Rework+Inspection < Cost of failure.

Controlling Quality

  • Cost Charts.
  • Bench Marks.
  • Experiments.
  • Sampling.
  • Flow Charts.

Perform Quality Assurance

  • Ensure we are doing the right thing.
  • Quality Audits.
  • Process Improvement.

Doing the right things, so it’s usable and value.

Perform Quality Control

  • Doing things right = satisfying deliverables.
  • Cause and effect diagram.
  • Control charts.
  • Flow charts.
  • Bar charts.
  • Run charts.
  • Scatter diagrams.