1. Acceptance and Flowdown A formal acceptance is signed by an “authorized” representative (usually the project manager or contracts) this must be “flowed down” internally in order to authorize project work via an internal purchase, sales or work order comprising: “Statement of Work” for authorized amount = Contract SOW (CSOW) Contract Price – which forms the “Contract Price” used to derive the eventual budget (Week 4) Eventually, these contractual requirements will be reflected in the project planning documents through to the lowest level Control Accounts will be set up to contain the budgetted “Contract” price (Cost Planning) Issues project work orders to flow down the authorized scope (Scope Planning)

2. The Contract drives the Project 674-2435 Scope Flowdown Funding Flowdown Contract Project work is driven by some form of “Contract” Formal contracts are usually established with external customers “Informal” contracts are/should be established with “internal” customers, and may simply be memo’s, work orders, or an e-mail These Contracts “evolve” into the top level program instructions through a process that involves: Reviewing the “proposed” contract requirements Preparing a response Negotiating and accepting the final contract “Flowing down” the final contract into the project At each step, the contract contains two distinct elements: The “work to be performed”, or Scope The resources (funds, equipment, staff) to be provided to pay for performance and profit Contract Review/ Proposal Cost Estimate Scope Planning NContract Negotiations Contract SOW Contract Price/ Program Budget Program Work Order Control Accounts

3. The Contract drives the Project 674-2435 Scope Flowdown Funding Flowdown Contract Project work is driven by some form of “Contract” Formal contracts are usually established with external customers “Informal” contracts are/should be established with “internal” customers, and may simply be memo’s, work orders, or an e-mail These Contracts “evolve” into the top level program instructions through a process that involves: Reviewing the “proposed” contract requirements Preparing a response Negotiating and accepting the final contract “Flowing down” the final contract into the project At each step, the contract contains two distinct elements: The “work to be performed”, or Scope The resources (funds, equipment, staff) to be provided to pay for performance and profit Contract Review/ Proposal Cost Estimate Cost Planning NContract Negotiations Contract SOW Contract Price/ Program Budget Program Work Order Control Accounts

4. ? Cost Planning Scope Planning

5. ? Cost Planning Scope Planning $ Cost Planning = Matching authorized funds with authorized work to make things happen

6. Basis of Estimate (BOE) Work Breakdown Structure Distributed Budget Work Order Control Accounts

7. Basis of Estimate (BOE) A cost estimate is prepared. The estimate is converted into a project budget, usually through contract negotiation. The budget is divided into control accounts. The control account budgets are “distributed” to fund the scope which has been assigned to Work Packages to create the “distributed budget” Project Budget Cost Estimating Distributed Budget Control Accounts

8. Basis of Estimate (BOE) A cost estimate is prepared. The estimate is converted into a project budget, usually through contract negotiation. The budget is divided into control accounts. The control account budgets are “distributed” to Work Packages to create the “distributed budget” Project Budget Cost Estimating Distributed Budget Control Accounts Cost Budgetting How do we know which Work Packages to distribute the budgets to?

9. Closing the Loop between Work and Funding 5. The WBS is used to define both the Control Accounts and the Work Packages being authorized. Because of this common link, funds in the distributed budget “line up” with Work Packages, so that Budget and Work Packages may be connected and used to authorize work through a “Work Order” form Cost Estimation Cost Budgetting Work Authorization