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Project Cost Management includes the processes involved in
- managing, and controlling costs
so that the project can be completed within the approved budget.
Project Cost Management processes are:
- Plan Cost Management—The process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs.
- Estimate Costs—The process of developing an approximation of the monetary resources needed to complete project activities.
- Determine Budget—The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.
- Control Costs—The process of monitoring the status of the project to update the project costs and managing changes to the cost baseline.
On some projects, especially those of smaller scope, cost estimating and cost budgeting are tightly linked and can be viewed as a single process that can be performed by a single person over a relatively short period of time.
Project Cost Management should consider the stakeholder requirements for managing costs. Different stakeholders will measure project costs in different ways and at different times. For example, the cost of an acquired item may be measured when the acquisition decision is made or committed, the order is placed, the item is delivered, or the actual cost is incurred or recorded for project accounting purposes.
Project Cost Management should also consider the effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting the product, service, or result of the project. For example, limiting the number of design reviews can reduce the cost of the project but could increase the resulting product’s operating costs. Project Cost Management is primarily concerned with the cost of the resources needed to complete project activities.
Project Cost Management may address additional processes and numerous general financial management techniques such as return on investment, discounted cash flow, and investment payback analysis. The cost management planning effort occurs early in project planning and sets the framework for each of the cost management processes so that performance of the processes will be efficient and coordinated.
Concluding Remarks: Along with Scope and Time, Cost Management is one of the very important consideration with regards to Project Objectives. It forms a triad for making any decision with regards to Project Goals – Scope, Time and Cost.
Source: PMBOK 5th Edition
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