TABLE OF CONTENTS A billion here and a billion there. Pretty soon it starts to add up to real money.
Senator Everett Dirksen
Besides work definition and scheduling, the other major focal points of project planning are cost estimating and budgeting. The concepts described in Chapters 6, 7, and 8 are used in this chapter to show how estimates and budgets are combined with WBSs and schedules into a single, integrated plan.
Cost estimates, budgets, WBSs, and schedules are interrelated concepts. Ideally, estimates for project costs are based upon elements of the WBS and are prepared at the work package level. When the cost of a work package cannot be estimated because it is too complex, the work package is broken down further until it can. When the cost cannot be estimated because of uncertainties about the work, the estimate is initially based upon opinions and judgement, and is then refined as information becomes available. Project schedules dictate rates of expenditures and cash flows, but, as described in the last chapter, the converse is also true: limited resources and working capital dictate the scheduling of activities.
It is necessary in projects to put practical constraints on costs so that realistic budgets can be established. Failing to do so results in projects that are prematurely terminated for lack of funds, or are completed but at exorbitant expense. Both occurrences are relatively commonplace.
Cost estimating, budgeting, and cost control sometimes are thought to be the exclusive concerns of project planners and accountants, but in...
