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Cost planning

Cost planning in Agile project management and calculation costs for development

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Cost planning in Agile project management and calculation costs for development

The following article is part of the self-preparation for the modern BVOP® Project Management Certification program.

This chapter explains the concept of Cost planning in the context of BVOP.

  1. What is Cost planning?
  2. Cost planning at Agile Project Management Practices
  3. Who plans and calculates costs?
  4. Predefined costs
  5. Costs for development

What is Cost planning?

Cost planning is the activity that the project manager performs at the beginning of the project to calculate all the necessary costs associated with the project and represents a formal evaluation of the total costs.

Cost planning may not be related to the whole project, but only to specific activities and parts of the project.

In Waterfall project management practices, cost planning typically refers to all the work that needs to be completed and includes all additional costs such as wages, rents for premises, purchase of consumables, parts, materials, tools, machines, and more.

Cost planning at Agile Project Management Practices

Regardless of whether a project or product is developed following Waterfall or an iterative approach, the necessary costs for development still often need to be calculated in order for stakeholders to have an idea of ​​the needed investment.

Modern literature does not indicate clear concepts, rules, and practices for cost planning in Agile methodologies, but we recommend that you have a good understanding of this topic as you may need to answer these questions in a real situation.

Who plans and calculates costs?

Usually, the project manager plans and calculates costs. Key roles from all other teams consult the project manager on cost types.

In Agile methodologies, cost planning is not a topic of concern and there are no popular examples.

Scrum also has no rules regarding cost planning.

However, BVOP recommends that every Agile-oriented professional or Scrum participant be aware of this matter. BVOP has created a mechanism for calculating estimated development time using relative units. You can find more information in the next chapters.

About this chapter

This chapter is part of the BVOP Project and Program Management Certification program guide.

Cost planning may include:

  • Predefined costs 
  • Costs for development

Predefined costs

The predefined costs may consist of all project costs that are not related to its development or maintenance.

These may include costs for:

  • Staff hiring
  • Marketing
  • Sales
  • Acquisitions
  • Operations
  • Legal
  • Taxes
  • Tools and environment

Predefined cost planning is implemented at the earliest possible stage of the project.

Costs for development

Costs for development are applied in early stages, after planning the major deliverables, where each deliverable (item, module, feature, service, or any other related activity) may be roughly estimated.

Detailed cost plans at this stage can be considered as a forecast, and all stakeholders should be aware of possible changes.

Detailed and more accurate planning can be done when project development begins, and real data is used to predict the time to complete efforts.

Updating development costs can take place over specific periods if the organization needs timely updates and calculations of the estimated costs.

The following issues related to chapter "Cost planning" are included in the certification exam. The sequence of questions is presented in the table.
The data is current as of July 8, 2020, 5:46 pm

ID Issue Time Category
0 What is Cost planning? 60 sec PM, PDM
1 Cost planning at Agile Project Management Practices 60 sec PM, PDM
2 Costs for development 60 sec PM, PDM
3 Predefined costs 60 sec PM, PDM
4 Who plans and calculates costs? 60 sec PM, PDM
Comments of our guests
  1. Marta Kirilova
    Hi all, "Predefined cost planning is implemented at the earliest possible stage of the project." What if not everything can be planned at the earliest possible stage, and later the project reveals additional costs that were not identified earlier?
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