Project Cost Management.
Project Cost Management, as it is obvious from the term is the management of the cost that the company/organization/owner has to bear for the completion of a certain project.
It involves the planning and budgeting of all the possible expenditure for the completion of a project or a business.
Planning is needed before taking any step in a business because we cannot step into anything new without having an idea about the outcomes and what it will cost us because no one has an unlimited budget. Only a certain amount of finances from a company or a person can be spent on a project or a business.
In the planning phase, costs are carefully assigned to the parts of the projects and then closely monitored if everything is going according to the plan or not.
How successful was the planning and budgeting can be checked by comparing the planned cost and the cost that has actually incurred. By doing this, Cost Management of the future projects can be done more efficiently if any point was missed now.
The budget that is planned is first approved by the executive involved in the financing of the project and then took to the next step.
Basically, the success of a project depends upon the TRIPLE CONSTRAINT which revolves around three metrics, Time, Cost and Scope. Imbalance in one can disturb the project badly, hence it needs to be taken care of.
There are three really important steps in Project Cost Management:
l Estimate Costs.
l Determine Budget.
l Control Costs.
Estimate Costs:
A process which can estimate what input is needed financially and then work on it.
A Cost management plan should be projected and the a human resource management plan should be presented keeping the view in mind that what kind of workforce is needed to complete this project. A proper scope baseline should be placed. A Project schedule should be planned. A risk register should be made just in case anything unusual happens. Enterprise environmental factors should be kept in mind too and organizational process assets should be checked.
The tools and techniques that are needed are:
l Expert judgment.
l Analogous estimating.
l Parametric estimating.
l Bottom-up estimating.
l Three-point estimating.
l Reserve analysis.
l Cost of quality.
l Project management software.
l Vendor bid analysis.
l Group decision-making techniques.
We move on to the next step after evaluating the outputs.
Determine Budget:
A comprehensive budget is determined after the estimation of cost and it is compared with what company have in box for the concerned project.
Following tools and techniques are needed in order to complete this step:
l Cost aggregation.
l Reserve analysis.
l Expert judgment.
l Historical relationships.
l Funding limit reconciliation.
The next and final step is to control the cost.
Control costs:
Project management plan should be implemented properly and project funding requirements should be completed. Work performance data should be analyzed and organization process assets should be reviewed.
Following tools and techniques are needed in order to control the costs:
l Earned value management
l Forecasting
l To-complete performance index (TCPI)
l Performance reviews
l Project management software
l Reserve analysis
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