Chapter 9. Budget and Procurement
9.0 Learning Objectives and Overview
- Define the project cost and explain its types.
- Create a project cost plan to help guide the project team through the implementation and closure phases of the project.
- Define the budget estimation techniques.
- Describe the process of documenting project procurement decisions, specifying the approach, and identifying potential sellers. Define the resources that will be utilized in a project, including the project team members
- Practice the allocation of resources and calculation of their costs with Microsoft Projec
While performing the planning of all the knowledge areas (e.g., scope, schedule, cost, quality, stakeholders, risks), the project manager should be aware of the fact that all knowledge areas are tightly linked to each other. That is, it is not possible to start with cost or quality first. The scope is the starting point when project managers with the help of business analysts, subject matter experts, clients, the project sponsor, and various stakeholders identify the project purpose, measurable objectives, requirements, deliverables, and WBS activities. Whereas scope, time, and cost are the main constraints of a project, all three are tightly linked to the resources, which are other constraints that include time and cost as critical resources. After the scope (see Chapters 3 and 4) and schedule (see Chapter 7) are delineated, the project manager can continue with the identification and allocation of resources based on the scope (requirements and project activities) and the schedule (how project activities are sequenced with duration for each of them). Allocation of resources provides the project manager to determine the overall project budget most of which is spent on resources (Chapter 8).
Every project boils down to money. If we had a bigger budget, we could probably get more people to do the project more quickly and deliver more. That’s why no project plan is complete until we come up with a budget. But no matter whether the project is big or small, and no matter how many resources and activities are in it, the process for figuring out the financial bottom line is always the same. This chapter starts with defining the project cost and its types, then elaborates on the cost management plan, continues with how to estimate costs and determine the budget, and ends with project procurement management. We will expand Microsoft Project exercises in chapters 4 (scope), 7, (schedule), and 8 (resources) by specifying the cost for all the activities and the overall project.