7.0 Project Cost Management

7.0 Project Cost Management

What? “Processes involved in estimating, budgeting and controlling

costs (of resources needed) so that the project can be completed within the approved budget. ”

Three Cost Management Processes :

7.1 Estimate Costs -Develop an approximation of the monetary resources needed to complete project activities.

7.2 Determine Budget -Aggregate the estimated costs of individual activities or work packages to establish an authorized cost base line.

7.3 Control Costs – Monitor the status of the Project to update the project budget and manage changes to the cost baseline.

Above processes overlap, are mutually interactive and interact with other knowledge areas as well.

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• Estimate Costs • Determine Budget

• Control Costs

-Planning process -Planning process

-M&C process

Cost management plan establishes criteria for planning, structuring, estimating

budgeting and controlling costs and is part of project management plan Cost Management processes, tools and techniques are built into Cost Management Plan

Life-cycle costing, together with value engineering techniques, can improve

decision-making and is used to reduce cost and execution time and to improve the quality and performance of the project.

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Cost Managment Plan includes: 1. Specifications of how estimates should be stated 2. Level of accuracy :Depends on the complexity of the project 3. Units of Measure (ex: staff hrs or staff days or staff weeks) 4. Organizational procedures-links: WBS provides the framework for Cost Management Plan. WBS component used for cost accounting is called control account ( CA). Each CA has a unique code identifier.

5. Control thresholds: Specifies allowable variation or deviation.

6. Rules of performance measurement: Sets rules for EVM (Earned Value Measurement).

7. Reporting formats: Formats and frequency for cost reports generation.

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7.1 Estimate Costs :

It is the process of developing an approximation (It is a...