Project Planning: Cost and Quality Management Planning

Running Head: PROJECT PLANNING
Project Planning
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1PROJECT PLANNING
Cost Management Planning
The project cost estimate is shown in the following table.
Resource/Requirement Estimated Cost
Land Costs $600,000
Building Costs $7,000,000
Interior Development Costs $500,000
Site Improvements and Other Costs $600,000
Contract Payments and Workers’ Wages $800,000
Plumbing, Electric Wiring Costs $300,000
TOTAL $9,800,000
The cost baseline budget of the project is estimated as follows.
Requirements Budget
Land Procurement and Legal Licensing $800,000
Salary and Contracts Budget $1,000,000
Construction Materials and Cost Budget $8,000,000
Interior Development Budget $1,000,000
Additional Budget (including contingency) $1,000,000
TOTAL $11,800,000
The above two tables show the estimated costs for the project and the estimated baseline
budget that is required for the project. There is a significant difference between the two – the

2PROJECT PLANNING
baseline budget is an estimated value by considering worst case scenarios, maximum possible
costs and contingencies. On the other hand, the estimated costs include the values that are
deduced from the current costs and possible good case scenarios for the preparation of a financial
plan (Goetsch & Davis, 2014). The baseline budget is prepared so that an overall idea for the
possible cost of the project can be gathered whereas the estimated costs give the idea about the
possible costs of the project in the current market condition and contract requirements. For
finding both of the two, several project management tools have been utilized. For initial cost
estimation, project scheduling technique has been utilized with the help of Microsoft Project
Software. This software can be used to develop the schedule of the project and assign resources
(human or material) to each of the activities. The software can automatically estimate the costs if
the standard rates of the resources are entered (Chen & Luo, 2014). However, the estimated costs
are generally inaccurate and do not reflect the true values of budget required for the project.
Furthermore, during cost estimation, only the main costs that are directly attached with the
project are considered without additional costs and contingency budget. For the analysis and
determination of the estimated baseline budget, several aspects have been considered as follows:
Worst Case Scenario – This is for determining the project costs if all the aspects of
expenses are of the maximum value. For instance, while determining the costs of the building
framework materials, the maximum prices that might be charged by the vendor for the materials
are considered (Khodakarami & Abdi, 2014). The worst case scenario is also considered for
contract payments as they may increase if certain terms and conditions are not met by the
organization.
Contingency – Determination of contingency is one of the most critical factors in
determining project baseline budget. All possible accidental incidents are considered and