Chapter 9. Budget and Procurement
9.8 Key Takeaways
Key Takeaways
- Allocation of resources allows the project manager to determine the overall budget, most of which is spent on resources.
- Three types of project costs are direct costs, direct overhead costs, and general administrative costs.
- The project cost management plan is one of the sub-plans of our overall project plan, and it provides guidelines to project managers on how to estimate, budget, manage, monitor, and control project costs.
- The techniques to estimate costs are expert judgment, analogous estimating, parametric estimating, three-point estimating, and bottom-up estimating. Generally, project managers utilize some techniques together to estimate activity costs.
- The process of subtotaling costs by category or activity is called cost aggregation. This process leads to the establishment of a cost baseline which is a time-phased budget that can be used to measure and monitor cost performance after it has been approved by the key project stakeholders.
- Funds allocated to deal with known-unknowns are called contingency reserves. The monetary amount of contingency reserves is determined after the risks are identified, and the strategies to mitigate the impact of the risks are detailed.
- Projects seldom go according to plan in every detail. Baseline budgets often change after they have been approved.
- A project procurement management plan documents project procurement decisions, specify the approach, and identify potential sellers.
- Project teams should determine whether to build a solution for the organization’s or client’s needs or buy one already available in the market.
- The most common contract types are fixed-price, cost reimbursable or cost plus, and time and materials contracts.
