introduction
hello there
this is Maher islaieh and welcome to first article of knowledge Area ((Project Cost Management))
Project Cost Management
Project Cost Management includes the processes involved in :
- planning,
- estimating, budgeting,
- financing,
- funding,
- managing,
- and controlling costs
so the project can be completed within the approved budget.”
- the main goal of project management is keeping expenditures within the approved budget.
For a project to be called successful, it’s necessary that
- it delivers on the requirements and scope
- its execution quality is of a high standard
- it’s completed within schedule and
- it’s completed within budget.
SO,,,
project cost management is one of the key pillars of project management and is relevant regardless of the domain, be it manufacturing, retail, technology, construction and so on.
It helps to create a financial baseline against which project managers can benchmark the current status of their project costs and realign the direction if needed.
Cost Management Concepts
Cost management is sometimes also known by its more specific sub-task names, like spend management, cost transparency and cost accounting. It is typically made up of four processes: resource planning, cost estimation, budgeting and cost control.
Resource Planning
- Starting with the resource plan, project managers will typically use a work breakdown structure to show the project and its deliverables in a hierarchy from most important to least. This piece helps project managers to understand where the bulk of the costs will funnel towards, and which components of the project will require the least expenditure.
Cost Estimation
- The second stage, cost estimation, is a process that’s iterative—meaning that it’s designed to change as the project changes. This stage uses many different estimation techniques that are determined by conceptual goals, historical knowledge, expert judgement, determinative techniques or a component-by-component basis.
- Historically-speaking, determinative techniques have been shown to be the most accurate. However, this process only makes sense to use once every last project detail has been mapped out—including the scope and deliverables. For projects that are lacking fine print, less accurate cost estimation techniques will still be valuable during this stage.
Budgeting
- Now, the cost estimation phase might have felt like you mapped out your budget already, but really you just mapped out the blueprints for your budget. Your project budget will be a little more precise by this measure, and will enable the project to truly succeed.
- Budgets are formed and approved after the estimation phase, and are typically released for the project in a series of phases depending on the project’s progress. This will help the project reach its milestones within each budgetary phase, rather than trying to match an overall project budget.
Cost Control
- This one is simple—you’ll measure your project’s dollar value performance against your total cost and timeline. This will help provide a benchmark throughout the project process.
- First, your requirements are established well in advance, during the project planning phase. Then, they are used as a method to challenge reasons for changes in cost. This will help to course-correct should a cost increase out of budgetary range and keep the project from ballooning out of control.
- Ultimately, your cost management plan will help you to both plan for the project cost, and manage your project cost throughout the course of the project’s life cycle. As your project is underway, your project expenses will be thoroughly documented throughout the project so that your project can stay within budget.
Cost Management Processes
Cost Management include 4 processes :
7.1 Plan Cost Management (Planning phase )
7.2 Estimate Cost (Planning phase )
7.3 Determine Budget (Planning phase )
7.4 Control Cost (Monitoring & Controlling phase )
conclusion
this was briefly an overview about knowledge area ( Cost Management )
next articles we will discus each process in cost management in FULLY Details
please join us there
