Managing the Project Costs

Controlling the project costs is more than a philosophy—it's the project manager working with the project team, the stakeholders, and often management to ensure that costs don't creep into the project and then managing the cost increases as they happen. To implement cost control, the project manager must rely on several documents and processes:

• Cost baseline You know this one already. The cost baseline is the expected cost the project will incur and when those expenses will happen. This time-phased budget reflects the amount that will be spent throughout the project. Recall that the cost baseline is a tool used to measure project performance.

• Project funding requirements The funds for a project are not allotted all at once, but stair-stepped in alignment with project deliverables. Thus, as the project moves towards completion, additional funding is allotted. This allows for cash-flow forecasting. In other words, an organization doesn't have to have the project's entire budget allotted at the start of the project, but it can predict, based on expected income, that the budget will be available in incremental steps.

• Performance reports These reports focus on project cost performance, project scope, and planned performance versus actual performance. The reports may vary according to stakeholder needs. We'll discuss performance reporting in detail in Chapter 10 and everyone's favorite, earned value management, in just one moment.

• Change requests When changes to the project scope are requested, an analysis of the associated costs to complete the proposed change is required. In some instances, such as when removing a portion of the project deliverable, a change request may reduce the project cost. (I know, that's wishful thinking; but in PMI's world, it's possible.)

Cost management plan The cost management plan dictates how cost variances will be managed. A variance is a difference between what was expected and was experienced. In some instances, the management contingency reserve allowance can "cover" the cost overruns. In other instances, depending on the reason why the overrun occurred, the funding may have to come from the project customer. Consider a customer who wanted the walls painted green and after the work was completed, changed his mind and wanted the walls orange. This cost overrun is due only to a change request and not a defect.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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