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Project Cost Management includes the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. There are three major parts in this management area:
1-Cost Estimating ' developing an approximation of the costs of the resources needed to complete project activities.
2 Cost Budgeting ' aggregating the estimated costs of individual activities or work packages to establish a cost baseline.
3 -Cost Control ' influencing the factors that create cost variances and controlling changes to the project budget.
These processes interact with each other and with processes in the other Project management Knowledge Areas as well. Each process can involve effort from one or more persons or groups of persons based upon the needs of the project. Each process occurs at least once in every project and occurs in one or more project phases, if the project is divided into phases. Although the processes are presented here as discrete elements with well-defined interfaces, in practice they may overlap and interact in ways not detailed here.
Project Cost Management is primarily concerned with the cost of the resources needed to complete schedule activities. However, Project Cost Management should also consider the effect of project decisions on the cost of using, maintaining, and supporting the product, service, or result of the project. For example, limiting the number of design reviews can reduce the cost of the project at the expense of an increase in the customer's operating costs. This broader view of
Project Cost Management is often called life-cycle costing. Life-cycle costing, together with value engineering techniques, can improve decision-making and is used to reduce cost and execution time and to improve the quality and performance of the project deliverable.
Project Cost Management considers the information requirements of the project stakeholders. Different stakeholders will measure project costs in different ways and at different times. For example, the cost of an acquired item can be measured when the acquisition decision is made or committed, the order is placed, the item is delivered, and the actual cost is incurred or recorded for project accounting purposes.
Project manager should form and establishes the criteria for planning, structuring, estimating, budgeting, and controlling project costs. The cost management processes and their associated tools and techniques vary by application area, are usually selected during the project life cycle
definition, and are documented in the cost management plan.
the cost management plan can establish:
1. Project Cost Management Overview
Work Breakdown Structure
The project's work breakdown structure (WBS) provides the relationship among all the components of the project and the project deliverables
The WBS dictionary and related detailed statements of work provide an identification of the deliverables and a description of the work in each WBS component required to produce each deliverable.
Project Management Plan
The project management plan provides the overall plan for executing, monitoring, and controlling the project, and includes subsidiary plans that provide guidance and direction for cost anagement planning and control. To the extent that other planning outputs are available, they are considered during cost estimating.
Schedule management plan. The type and quantity of resources and the amount of time those resources are applied to complete the work of the project is a major part of determining the project cost. Schedule activity resources and their respective durations are used as key inputs to this process.
Setting realistic plans for the expenditure on a project can cause much guessing to be done in the initial stages. These guesses are more vague if only a little is known about the projects being studied. The resource smoothing method as it can be applied to cost aspects of project planning is described.
Project Scope Statement
Scope statements have much type of project that have been implemented in direction of nature of the organization and project. The scope statement describes the project deliverables. It will determine the major objectives. The objectives should include measurable success criteria for the project.
The Scope Statement will mention the product of the project, For example, "developing software based to control the cost of painters." The Scope Statement has also the list of users that use the product, as well as the features in the deliverables.
Activity Cost Estimates
The cost estimates for each schedule activity within a work package are aggregated to obtain a cost estimate for each work package.
In the official Contract of every project, there are all information about products, services, or results that should be purchased. Costs of all the deliverables should be clear and this should be considered in developing the budget.
Work Performance Information
Work performance information is in relation to the cost of project activities which are performed.
Some of these information are:
' All the Deliverables which can be completed or not
' All the authorized Costs or incurred
' Estimates to complete activities in the schedule.
' show the Percentage of activities completion.
1- Cost Estimating
Estimating schedule activity costs involves developing an approximation of the costs of the resources needed to complete each schedule activity. In approximating costs, the estimator considers the possible causes of variation of the cost estimates, including risks.
The cost estimating process considers whether the expected savings can offset the cost of the additional design work. Cost estimates are generally expressed in units of currency (dollars, euro, yen,etc.) to facilitate comparisons both within and across projects. In some cases, the estimator can use units of measure to estimate cost, such as staff hours or staff days, along with their cost estimates, to facilitate appropriate management control.
The accuracy of a project estimate will increase as the project progresses through the project life cycle. The costs for schedule activities are estimated for all resources that will be charged to the project. This includes, but is not limited to, labor, materials, equipment, services, and facilities, as well as special categories such as an inflation allowance or a contingency cost. A schedule activity cost estimate is a quantitative assessment of the likely costs of the resources required to complete the schedule activity.
Tools and Techniques
Top-down Estimating model (Analogous Estimating)
Analogous Estimating is known as Top-down Estimating model. This technique determines the length of the project. It will compare the previous project's activities with the current project activities and determine the length in time.
This estimation technique determines the length of an activity usually during the early stages of project that such information is not available .
Bottom-up estimating is technique in project management. It has the ability to get a more refined estimate for each component of project. In bottom-up estimating, each work is broken down into smaller task. Then, estimations are developed and they determine what is needed to meet the needs of smaller components of the work. The estimations of smaller individual components will be performed and then they will be aggregated to develop a larger estimation for the entire work.
In this method, the estimation for the task as a whole is more accurate. This methods consider more carefully each of the smaller parts of the work.
This method then combines these carefully considered estimations rather than making only one estimation. In the one estimation, we typically will not consider all of the individual components of a task. In general, when we have smaller scope, the accuracy will be higher.
Parametric estimating is a statistical technique that considers relation between data and variables
And it calculates cost estimation for a activity resource. This technique can also give us more accuracy.
It depends on the complexity, as well as the resource quantity and cost data that we have consider in the model. An example can be seen as multiplying the planned quantity of work. It will be performed by the historical cost per unit that gives the estimated cost to project manager.
On the Cost budgeting (************) part, we elaborate the parametric estimation more.
Reserve analysis is a technique that helps to maintain and manage the projects that may have respective time. It is usually implemented by the project management project managers. Reserve analysis is a analytical technique that determines the entirety of the specific features. It also determines the relationships of all of the individual project components.
With the execution and implementation of a reserve analysis, we will be able to establish an estimated reserve that can create schedule duration and other estimated costs and the budget. It also completes all the funds allocation of the project.
Activity Cost Estimates
Activity cost estimate is a quantitative method that defines the costs of the resources which is required to complete schedule activities. Costs will be estimated for all resources and this can be applied to the activity cost estimate. This method can include the costs like labor, materials, equipment, facilities, services, and all other categories such as information technology costs or cost contingency reserve. 
All the provided levels should support the documentation that provides a complete picture by which the cost estimate was created. The details for the activity cost estimates should include:
'Schedule of activity's project scope of work
' Documentation of the basis for the estimate any assumptions made and any constraints.
Project Management Software
Project Management Software like; cost estimating software with the simulation and statistical tools, can be used to help the cost estimating. Such tools can facilitate cost estimating techniques so we can take into consideration the various cost estimate alternatives. 
2 Cost Budgeting
Cost budgeting aggregate the estimated costs of every schedule activities in the work packages. It tries to establish a cost baseline to measure project performance.
The project scope defines the summary of the budget.
schedule activity cost estimates detailed budget requests and take care of work authorization .
Once you have a WBS and a schedule, you can go to the next step and develop a time-phased budget which details when you plan to spend the project's budget and what you expect to have accomplished at each level of expenditure. A time-phased budget is sometimes called an earned value plan.
At this juncture, you have all the data you need to create your initial budget. You set a project budget by assigning cost to each WBS item. Using your staffing plan and schedule, assign the human resources to each of the tasks. Using a spreadsheet or, better yet, a project management tool, you can calculate the labor expense. Given the labor rates for each job category, multiply the number of hours assigned to each of the resources by the rate. Add your estimates for the other costs'travel, software licenses, hardware, and whatever else you need.
By comparing the planned and actual money spent against the planned and actual completion of the WBS items, you have a measure of how well you are tracking the budget. If the entire budget for a set of WBS items has been spent and the items are not complete, clearly you have a problem staying on budget. A variety of differences and ratios are available for determining budget health of a project once you have a time-phased budget. These ratios can and should be tracked on a monthly basis .
Tools and Techniques
The goal of any cost management system is to provide relevant and timely information to management. This information supports better management of corporate resources in production of products or provision of services 
Aggregation of work packages in relation with the WBS are Schedule activity cost estimates.
The work package cost estimates can be aggregated that the component levels of the WBS can reach higher. For example; control accounts for the project .
A parametric model lets you estimate effort from an explicit set of variables: Program size, function points, program capability, facilities, modularity, and so on. The parametric model is based on a set of statistical assumptions and mathematical equations that express how the effort estimate depends on the parameters. It is calibrated by fitting the model to the measured productivity of a set of real projects.
Applying the parametric model takes the package-level analogy to another level of detail. The technical expert, rather than relying on gut feeling and experience to estimate the effort, uses his or her insight to assign values to the parameters. All parametric models consist of numerous variables each of which must involve some subjective judgments. Each of the parameter values is tantamount to an informed guess. A parametric model essentially replaces several informed guesses with one informed guess. There are several parametric estimation tools available.
Some of the commercially available tools use proprietary algorithms, while others require an element of faith. Certain of this claim to be tailored to object-oriented
Projects. But the ones I have seen do not consider use cases as a measure of Requirements, but rather seem mainly concerned with measures of object complexity (such as depth of inheritance). Certainly, it is true you can add effort by making your designs unnecessarily complex, but that insight does not help in planning. The literature on sizing object-oriented projects is remarkably sparse.
Therefore, we review Barry Boehm's Constructive Cost Model (COCOMO) family of models.
Metrics should be used in conjunction with Estimating techniques such as Cocomo. There has been an increasing interest in monitoring and controlling project performance. Earned Value Analysis presents itself as an easy-to-understand technique that helps to monitor and control project's performance. Cocomo II and Earned Value Analysis in the processes should consider from PMBOK for planning and controlling software development projects.
The goal of such a sequence of steps is to help project managers to plan, monitor and control software development projects using the PMBOK and software functional metrics.
Cocomo is a technique largely adopted in the software engineering area. A case study using an actual software project data was below the ceilings to evaluate our proposal. An add-in for Microsoft Project tool was developed to support that such a sequence of steps can be automated and integrated. 
The COCOMO cost estimation model and was created on a study of many software projects and can be used by every project managers. COCOMO is an open model, it is consist of these details:
The underlying cost estimation equations,assumption and Every definition about The costs are included in an estimate.
COCOMO estimates are more objective than estimates which are made by other methods that rely on proprietary models. It can be modified to reflect your software development environment. It can also produce more accurate estimate 
COCOTS: Software COTS-Based System (CBS) Cost Model
Commercial-of-the-shelf (COTS) has becomes useful in large software systems.
The ability to predict the true lifetime cost reasonably should use these software components which grow accordingly.
COTS-based system cost model is a developing extension of the COCOMO II. The life cycle costs can be predicted in COCOTS with using COTS components. .
Funding Limit Reconciliation
Large variations in the periodic expenditure of funds are usually undesirable for organizational operations. Therefore, the expenditure of funds is reconciled with the funding limits set by the customer or performing organization on the disbursement of funds for the project. Reconciliation will necessitate the scheduling of work to be adjusted to smooth or regulate those expenditures, which is accomplished by placing imposed date constraints for some work packages, schedule milestones, or WBS components into the project schedule. Rescheduling can impact the allocation of resources . If funds were used as a limiting resource in the Schedule Development process, then the process is repeated using the new imposed date constraints. The final product of these planning iterations is a cost baseline.
1 Cost Baseline
The cost baseline is a time -phased budget which project manager use as a basis to measure, , and control the overall cost performance of every project. cost baseline is planning a budget that is adjusted to time.
This cost baseline is estimating the costs in the particular period of the project until its completion. The technique sums all the estimated costs by period. Then it will display them in an S-curve, as illustrated in Figure **.
The cost baseline is consisting of the project management plan.
Every project can have multiple cost baselines. It helps measure different parts of project cost performance.
A cost baseline is an important tool for project management plan. Every project cost manager can use it to ensure success of project in face of costs.
These kinds of measurements ensure that cost is evaluated in regards to yield of the project. This process has been used in successful companies that work on projects which has big influence on company's future .
Cost Management Plan Updates
If Cost Budgeting process has been changed, then the cost plan of the project which is one of components of the project management plan is updated. This can have a big impact on the management of costs in the budgeting of the project.
3- Cost Control
Establishing the project budget which shows with how the budget will be spent is cost control .
Project cost control will take care of:
' Changes that will happen to the cost baseline
' make sure that requested changes are agreed in management level
' Managing the changes of time and costs that happens in reality
' make sure that potential cost does not exceed funding which is authorized periodically specially in whole project
' controlling cost performance and detect the variances with regards to the cost baseline
' Considering all the changes against the cost baseline accurately and report it.
' It should prevent incorrect unapproved changes of reported cost or resource usage
' It should bring expected cost overruns in a acceptable limits. Project cost control can search the reason of variances and show which part is integrated with Change Control 
Budget tracking is a way to assess whether the amount you have spent at any point in
the project is in line with your plan. The tracking techniques in this section provide two views on the financial status:
Variances :The difference between actual and planned spending.
Projected costs: Estimates of the actual cost of the project based on the current rate of spending.
Here some terms to understand budget tracking:
' 'Budgeted cost of work scheduled (BCWS)'
' 'Budget cost of work performed (BCWP)'
' 'Earned value (EV)'
' Actual cost of work performed (ACWP)
' Percent complete (PC)
' Cost variance (CV)
' Cost variance index (CVI)
' Schedule variance (SV)
' Schedule variance index (SVI)
' Cost performance index (CPI)
' Estimate at complete (EAC)
' Variance at complete (VAC)
Tracking these measures also gives you the view of the program you need to
control your spending. The variances tell you whether you are spending money
faster than you should for the amount of work accomplished. The completion
estimates, EAC and VAC, can help you determine whether your budget is
adequate or adjustments are needed.
I described how to create a time-phase budget'a plan of how you expect to spend money during the phases of each of the builds. This calls 'budgeted cost of work scheduled (BCWS)', sometimes called planned cost. To determine the BCWS at a given date, go to your Gantt chart to see how much of the project you planned to have completed and add up the cost of the planned budget items done to that point. These costs generally include the labor, the staff assigned to the effort, hardware and software, and others, such as planned travel and meeting costs.
The BCWS does not measure value of the actual work performed. The accepted way to measure the planned and accomplished work is to assign a dollar value, called the earned value, to the scheduled work. Conceptually, if at any point in the program you can determine how much of the budget should have been spent to accomplish the amount of completed work, you have a basis of comparison for deciding if you are ahead or behind in your budget. If you have spent more than you expected to reach this point, you are behind budget; if you have spent less, you are ahead of budget. The earned value of the work is measured by the budgeted cost of work performed (BCWP). Compute the BCWP by assessing how far along you are in the development'the amount of work complete'and by computing the budget for that amount of work. 
Tools and Techniques
Performance Measurement Analysis
Performance measurement techniques help to assess the magnitude of any variances that will invariably occur. The earned value technique (EVT) compares the cumulative value of the budgeted cost of work performed (earned) at the original allocated budget amount to both the budgeted cost of work scheduled (planned) and to the actual cost of work performed (actual). This technique is especially useful for cost control, resource management, and production.
An important part of cost control is to determine the cause of a variance, the magnitude of the variance, and to decide if the variance requires corrective action.
The earned value technique uses the cost baseline contained in the project management plan to assess project progress and the magnitude of any variations that occur. The earned value technique involves developing these key values for each schedule activity, work package, or control account:
' Planned value (PV). PV is the budgeted cost for the work scheduled to be completed on an activity or WBS component up to a given point in time.
' Earned value (EV). EV is the budgeted amount for the work actually completed on the schedule activity or WBS component during a given time period.
This technique is of particular interest to software project managers. No longer must software projects use up all their resources before there is a harsh realization that much of the work has not been completed, forcing features to be dropped to stay within the added budget authorized by management. Earned-value project management can be most helpful to any software project manager who has made a firm ommitment to complete all the features within a definitive schedule and for a finite amount of funds.
The formulas provide a means to understand the financial health of a project without having to reassess the cost value for each of the unfinished tasks.
' Actual cost (AC). AC is the total cost incurred in accomplishing work on the schedule activity or WBS component during a given time period. This AC must correspond in definition and coverage to whatever was budgeted for the PV and the EV (e.g., direct hours only, direct costs only, or all costs including indirect costs).
' Estimate to complete (ETC) and estimate at completion (EAC). See ETC and EAC development, described in the following technique on forecasting. The PV, EV, and AC values are used in combination to provide performance measures of whether or not work is being accomplished as planned at any given point in time. The most commonly used measures are cost variance (CV) and schedule variance (SV). The amount of variance of the CV and SV values tend to decrease as the project reaches completion due to the compensating effect of more work being accomplished. Predetermined acceptable variance values that will decrease over time as the project progresses towards completion can be established in the cost management plan.
' Cost variance (CV). CV equals earned value (EV) minus actual cost (AC). The cost variance at the end of the project will be the difference between the budget at completion (BAC) and the actual amount spent. Formula: CV= EV ' AC
' Schedule variance (SV). SV equals earned value (EV) minus planned value (PV). Schedule variance will ultimately equal zero when the project is completed because all of the planned values will have been earned. Formula: SV = EV ' PV
These two values, the CV and SV, can be converted to efficiency indicators to reflect the cost and schedule performance of any project.
' Cost performance index (CPI). A CPI value less than 1.0 indicates a cost overrun of the estimates. A CPI value greater than 1.0 indicates a cost under run of the estimates. CPI equals the ratio of the EV to the AC. The CPI is the most commonly used cost-efficiency indicator.
Formula: CPI = EV/AC
' Cumulative CPI (CPIC). The cumulative CPI is widely used to forecast project costs at completion. CPIC equals the sum of the periodic earned values (EVC) divided by the sum of the individual actual costs (ACC).
Formula: CPIC = EVC/ACC
' Schedule performance index (SPI). The SPI is used, in addition to the schedule status (Section 220.127.116.11), to predict the completion date and is sometimes used in conjunction with the CPI to forecast the project completion estimates. SPI equals the ratio of the EV to the PV.
Formula: SPI = EV/PV
Figure ** uses S-curves to display cumulative EV data for a project that is
over budget and behind the work plan.
For object-oriented programs, we suggest you adopt the following methodsto compute the BCWS and BCWP values when you are between phases:
BCWS(Budgeted cost of work scheduled).
BCWP(Budget cost of work performed)
For example, if during the inception phase, you plan to develop 350 use cases and have completed 175, claim the BCWP for that phase is 50 percent of the BCWS of the phase.
BCWS and BCWP are views of your budget, not your spending. With BCWS and BCWP, you have a view of how much money you expected have spent at a given point in time (BCWS) and how much you expected to spend for the amount of work actually accomplished (BCWP).
To complete the picture, you need to track how much money you actually spent. You might be right on schedule'in which case, BCWS and BCWP are equal'but still have spent more or less than planned.
The actual cost of work performed (ACWP)
Will show amount of money spent to date. It is computed by adding up the project's expenditures. Your accounting department usually provides the information. The other financial measures are computed from the BCWS, BCWP, and the ACWP. Each of the calculations provides a useful measure for assessing how well you are tracking the budget. The next two measures are variances. Variances are differences between actual and planned values.
The cost variance (CV) is the difference between planned and actual cost for the accomplished effort.
CV = BCWP ' ACWP
It measures the difference between what you planned to spend and what you actually spent to do the amount of work done to date. If the CV is negative, you have a cost overrun; if it is positive, you have spent less then you expected to get the work done you are ahead of budget.
CV = BCWP ' ACWP
The schedule variance (SV) is the difference between the cost of the work accomplished to date and the cost of the work scheduled to date.
SV = BCWP ' BCWS
It measures the difference in the value of the work done and the work you expected to be done. If the value of the work actually done is less than you planned at a given point in time, the SV is negative and you are behind schedule. On the other hand, a positive SV means your team has done more work that you expected for this point in time, and so you are ahead ofschedule.
The percent complete (PC) is the percentage of the scheduled work to date that is actually completed.
PC = 100 ' BCWP / BCWS
The PC provides a view of the same information as the SV, normalized by the size of budget. It illustrates the importance of the SV.
In addition to the PC, two other normalized values are of interest: CV and SV,
normalized by the appropriate view of the budget.
The cost variance index(CVI)
is the cost variance normalized by the budgeted cost of work performed.
CVI = CV/BCWP = (BCWP ' ACWP)/BCWP
The schedule variance index (SVI)
is the schedule variance normalized by the budgeted cost of work scheduled.
SVI = SV/BCWS = (BCWP ' BCWS)/BCW
The CVI and SVI are used in the same way as the CV and SV, respectively.They measure whether the work done and money spent is on budget. By normalizing the variances with respect to the budgets, the CVI and SVI provide a comparison of the size of the variance and the budget. The quotients put the size of the variances in perspective.
Understanding the Variances
SV and CV are independent quantities. Knowing one will not enable you to compute the other. For example, it is possible to be ahead of schedule but over budget. Table 9.1 covers all the possibilities.
SV < 0
On or under budget and on or ahead of schedule: At this point in time, the amount of work performed is greater than or equal to the amount planned. In addition, you have not spent more than planned for work performed. This situation occurs when the planned resource gets the work done early or exactly on time.
SV < 0
On or under budget and behind schedule: At this point in time, the amount of work accomplished is less than planned. However, you have not spent more than planned for the work. This situation may arise if not all of your planned staff has been available. The smaller staff has performed well, but they cannot keep up with the schedule.
CV < 0
Over budget and on or ahead of schedule: At this point in time, you have spent more than planned for the work accomplished. However, that work was done before the planned date. This situation may arise if you have more staff than planned working the problem; however, that staff brought in the work ahead of schedule.
CV < 0
Over budget and behind schedule: At this point in time, you have spent more than
planned for the work accomplished and that work is behind schedule. This situation
may arise if your planned staff does not get the work done as rapidly as planned. They have charged the project at the planned rate, but the amount of work accomplished is less than expected. In this situation, the cost of the work accomplished is greater than planned.
Tracking the values over time on a graph helps to determine budget trends'whether the variances are growing over time. This lets you see whether your variances are getting better or worse. See Figure ** where the ACWP, BCWS, and BCWP are graphed.
The difference between the lines is variance. If the project were going exactly according the plan, the graphs would line up. The vertical line shows the completion. The horizontal line at the top is the final budget. If the project goes exactly as planned, the graphs will cross where the completion date and the BAC line intersect. The graph
gives you a visual representation of the budget trends. If the gaps between the lines is growing, then so are your variances. If it appears the graphs will cross the vertical line above the BAC line, then you are over budget.
Figure 7-7. Illustrative Graphic Performance Report
The earned value technique in its various forms is a commonly used method of performance measurement. It integrates project scope, cost (or resource) and schedule measures to help the project management team assess project performance.
Considering with time
Earned value management was originally developed for cost management and has not widely been used for forecasting project duration. However, recent research trends show an increase of interest to use performance indicators for predicting total project duration.
' Organizational procedures links. The WBS component used for the project cost accounting is called a control account (CA). Each control account is assigned a code or account number that is linked directly to the performing organization's accounting system. If cost estimates for planning packages are included in the control account, then the method for budgeting planning packages is included.
Integration of cost and schedule control systems has been an issue of great concern for researchers and practitioners in the construction industry. Nevertheless, the real-world implementation of this promising concept has not been popular enough to maximize the benefits that this integration has to offer. One of the major barriers is the overhead effort to collect and maintain detailed data.
As a project control technique concept that provides a quantitative measure of schedule and cost information, the earned value (EV) model can evaluate work progress by identifying the potential delay and the cost overruns in a project, which is useful for controlling projects.
This being the case, once the contract is awarded, the clients are no longer concerned with the cost of the project. This current construction practice based on the BBS rather than on the WBS has brought a limitation in terms of the use of the existing EV model in the domestic market 
INTEGRAQTION OF TIME AND COST
. Integration of WBS and OBS
FIG. 2. Hendrickson's Model
FIG. . Hendrickson's Model
FIG. 1. Teicholz's Model (Percent-Allocation Concept)