Working Toward Certification
A Project Management certification, such as the PMP, requires understanding of a defined set of processes for each knowledge area. The Project Cost Management knowledge area has the following processes:
- Estimate Costs: Performed during project planning
- Determine Budget: Performed during project planning
- Control Costs: Performed during project monitoring and controlling, i.e. the project is being implemented. Usually involves Earned Value Management.
The diagram shows a comparison of versions 3 and 4 of the PMBOK. (Click the image for a larger view.) As you can see, not a lot has changed for Project Cost Management in terms of processes. The processes have simply been renamed to start with a verb. For the CAPM and PMP project management certification, it is important for you to recall the names of the processes as specified in the PMBOK. In other words, Estimating Costs or Cost Estimating are not the same as Estimate Costs. In version 5, Plan Cost Management is identified as the first process identified in this knowledge area.
For an overview of the PMBOK Project Cost Management knowledge area, refer to: A Summary of PMBOK Practices – Cost Management. This was the version used in previous PMP project management certifications.
The Estimate Costs Process
In this Project Cost Management process, the activity cost estimates are determined. You will use the Project Cost Management techniques, such as Analogous Estimating, Resource Cost Rates Estimation, and Bottom-up Estimation. For more information, read the following Project Cost Management articles:
- Tools Used to Estimate Costs in Project Management
- Use Project Cost Estimating Techniques in Projects
- Practical Cost Estimation in Project Management
Project management certification, such as PMP and CAPM, require you to not only know the concepts but also application of the techniques. Each of the article listed above has practical Project Cost Management techniques examples.
The Determine Budget Process
In this process, the cost baseline and funding requirements are determined. You will use Project Cost Management techniques, such as Cost Aggregation, Reserve Analysis, Historical Data, and Funding Limit Reconciliation. For more information, read the following Project Cost Management articles:
The next process uses extensive Earned Value Management. You can expect a question on Earned Value Management in your project management certification exam.
Project Cost Management - The Control Costs Process
In this process, performance measurement and forecasting is conducted. You will use Project Cost Management techniques, such as Earned Value Management, Forecasting, To-Complete Performance Index (TCPI), Variance Analysis, and Performance Reviews. For more information, read the following Project Cost Management articles:
- Tools Used to Monitor and Control Costs in Projects
- Compute the Earned Value (EV) of a Project
- Examples of Cost Variance (CV) and Schedule Variance (SV) in a Project
- How to Compute Cost Performance Index (CPI) and Schedule Performance Index (SPI) in Projects
- Examples of Project Forecasting Computations
The last four articles listed above are critical reading for Project Cost Management and Earned Value Management. The links listed in this article all provide practical examples that’ll help you apply the concepts. They’ll help you succeed in your project management certification.