The develop project management plan in integration management involves the creation of the cost management plan. The plan cost management process institutes policies, procedures, and documents which plan, manage, update and control project cost. Each job generally uses different amounts of resources. Knowledge areas associated with the plan cost management process are. Project cost management includes the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be. Because this step often occurs in the planning phase, it is important to understand that the estimated costs are your best.
The cost management plan clearly defines how the costs on a project will be managed throughout the projects lifecycle. It refers to all the activities involved in the planning and controlling a projects budget. There are several activities in a project, several project resources work on project activities and several materials, tool and equipment are used to complete the project scope. The work breakdown structure wbs is the basis for the cost management plan because the costs are totaled or rolled up from the costs for the individual work packages in the wbs. Quantify risk factors and incorporate them as cost 4.
Which of the following inputs best conveys this requirement to the estimate costs process so that the insurance cost is estimated and subsequently budgeted. Cost management does not happen in isolation the project manager needs input from the project team and key stakeholders. Poor project cost management is one of the easiest ways to make a project go awry. Cost management plan a cost management plan is a document that describes how the organization will manage cost variances on the project based on estimation, but acted on through monitoring and controlling labor costs are a large percentage of total project cost time. The scope of the cost management plan is the processes, roles, and tools used to plan and manage project costs throughout the life of the project. Project cost management is the process of bringing as much predictability and control as possible to the expenses of a project. An important output of project cost management is a cost estimate there are several types of cost estimates and tools and techniques to help create them it is also important to develop a cost management plan that describes how cost variances will be managed on the project 12. The first process of this knowledge area is plan cost management process. Hence, good project management requires a firm grasp on the concepts and techniques in project budgeting and cost control. It includes activities such as planning, estimating, budgeting, financing, funding, managing, controlling, and benchmarking costs so that the project can be completed within time and the approved budget and the project performance could be improved in time. But in some situations it could be measured using other units, such as staff hours when developing a cost estimate, you need to consider all of the resources that will be used by the project. Estimating the costs the first step in cost management is to estimate the costs of each activity in the project. Cost control is the part of project management such that cost management processes involved in planning, estimating, budgeting, and controlling costs. It covers the theoretical aspects, the causes and effects, and possible countermeasures.
The following cost management activities are documented in this plan. Achieving project completion within the estimated cost is fundamental criteria for success of any project. In the case of a project, it helps the project manager estimate what the project will cost and set in place controls by which they can reduce the chance of the project going over budget. It regulates how project costs are managed through the project life cycle. A cost management plan is a document that describes how the organization will manage cost variances on the project based on estimation, but acted on through monitoring and controlling. Hence cost management and control is very important consideration for ensuring cost. It sets the format and standards by which the project costs are. Cost benefit analysis pdf the cost benefit analysis is based on the comparison of a base case and one or more alternatives. Create a project cost and budget development system.
Hence, good project management requires a firm grasp on the concepts and techniques in project budgeting and cost control thankfully, the project management body of knowledge pmbok gives us a strong foundation in this area project cost management is the fourth of. Project cost management pmp what is cost management. Cost is one of the key performance indicators for projects. Cost and budget, these two words are used interchangeably in the exam. Project cost management for project managers based on. Processes primarily concerned with the cost of resources required to complete the project activities. Cost estimating involves defining cost estimates for tasks. Any discussion of project cost management must also include fore casting, which takes place at the front end of the project environment. Pmp certification study notes 7 project cost management. Cost estimate information should be included when the communication plan is developed as part of the project management process.
Project cost management makes a clear distinction between the process to estimate costs as seen by the. Cost management is a really important one among all the project management knowledge areas. Cost management is the process of estimating, allocating, and controlling the costs in a project. Cost management process project management templates. You may or may not be a project manager, but now you can be the boss. This paper presents the current big issues in cost management. Managing the project budget free ebook in pdf format. Its aim is described in pmp courses as to define the necessary budget to execute the project and its aim is to monitor and control the project costs to match the approved budget.
A cost management plan must take into account the variables that impact the budget, whether materials or people. The cost object is a unit or multiple units of a distinct product or service called a job. You can check out the complete range of project management pdf ebooks free from this website. Cost management should occur early in project planning in order to establish a framework for all cost management processes and ensure that the. Cost management plan template free management ebooks. Tackle anything from small projects to large initiatives. Usually the cost is measured in currency such as the dollar, euro, or yen. Pdf cost management of large construction projects in. Thankfully, the project management body of knowledge pmbok gives us a strong foundation in this area project cost management is the fourth of 10 project.
Because the project scope, project schedule, or other factors can change, its important to update price estimates with the help of cost management software so you have an accurate idea of how much the project will cost. The pmbok describes three areas or processes for effective cost management. It allows a business to predict coming expenses in order to reduce the chances of it going over budget. Costs or expenses are recorded by team members, using expense forms. Page iv wsdot cost estimating manual for projects m 3034. The purpose of cost management is to ensure project costs are planned based on project need, tracked, changed according to procedure and reported on a regular basis. Cost management is the process by which one plans and manages the budget of a business or project. Created during the project planning phase, the cost management plan is a document that defines how you manage, control, and communicate a projects costs in order to complete the project on budget.
Cost management is one of the fundamental and yet most challenging tasks for a project manager. The triple constraint in project management refers to three metrics that define a project. In simple words, a cost management plan is the outline of the projects estimation, allocation and control of costs for the required resources to complete all project activities. It is important to note that the step of creating the cost management plan exists irrespective of where it is created. The cost management plan guides these four processes. Processes that help to estimate, budget, and control cost so as to ensure that the project is completed within the approved budget. A cost management plan is the outline of a projects estimation, allocation, and control of costs for the necessary resources needed to complete all the activities of the project. Construction contingency a standardized markup applied to the construction cost of a project that accounts for uncertainties in quantities, unit costs, and minor risk events that typically take place during construction. Project cost estimating is the process of approximating how much it will cost to complete the project activities. Project managers must make sure that their projects are well defined, have accurate time and.
It helps keep track of all the project cost and at the same time guarantees. The first task is to set the budget based on cost estimates and the second is to manage the costs so that they remain within the budget that. Cost management is concerned with the process of finding the right project and carrying out the project the right way. Cost management knowledge area plans how to manage expenses and budget of a project, monitor and control the status of the project and measures budget performance. The projects cost plan configuration is one of the most essential parts of a projects planning phase, and effectively serves as a safety net that guarantees that. Many projects start with good ideas, huge investments and great efforts. Among other things, a cost management plan identifies the individual or group responsible. Discuss the term job costing and process costing systems with examples job costing systems. Project cost management includes all those processes necessary to ensure that the project is. Train project managers in systematic project management 5. There are several types of cost estimation in project management, including fixed, variable, direct, and indirect cost estimation. T d jainendrakumar the cost management includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. The basis of estimate document can be used effectively as a communication tool to convey key information about the project to others. Costs include both human resource and physical resource costs.
The process of cost budgeting defines time phased cost estimates for the project. Project cost management preface this ebook describes the process of cost management in projects. Forecasting is the primary mechanism for ensuring that the project is on course, or for changing its direction if conditions in the project environment change. Project cost management for project managers based on pmbok by dr. Cost management is one of the 10 project management knowledge areas and it involves necessary processes to finish the project within the approved budget.
This project cost management process helps you to monitor and report all expenses within a project. Cost management overview project management professional. A particular project in the domain of civil construction requires that every onsite worker be insured. Large construction projects are inherently complex and dynamic. Surprise expenses are the enemy of any organization, so being able to accurately forecast the costs of a project ahead of time is a key skill to possess. The cost management includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. Project cost management involves planning, budgeting, and managing costs. Involved in controlling costs are processes centered around planning, estimating, budgeting, financing, funding and managing costs so that the project can be completed within the approved budget. The tools and techniques used for estimate costs are expert judgment. Therefore, in cost management, the triple constraint is at play. Show full abstract project manager and, determine budget the assignment of costs. A major contribution to unsuccessful projects is the lack of. Project cost management for project managers based on pmbok. Projected costs are calculated during the planning phase of a project and must be approved before work begins.
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