Control Costs Explained
Control Costs is a critical process in project management that involves monitoring the status of the project to update the project costs and manage changes to the cost baseline. This process ensures that the project stays within the budget and that any deviations from the planned costs are identified and addressed promptly.
Key Concepts
1. Cost Baseline
The Cost Baseline is a reference point against which project performance is measured. It includes the project budget, which outlines the planned costs for each activity, and serves as a benchmark for tracking and controlling changes to the project costs.
Example: In a software development project, the cost baseline includes the detailed budget, which lists the planned costs for coding, testing, and deployment activities. Any changes to these costs must be compared against this baseline to ensure they align with the original plan.
2. Cost Performance Measurement
Cost Performance Measurement involves tracking the project's progress against the cost baseline. This process includes collecting, measuring, and distributing performance information to assess the project's current status and identify any deviations from the planned costs.
Example: For a construction project, cost performance measurement might involve tracking the expenditure on key activities such as foundation work, framing, and finishing. If the framing phase exceeds the budget, the project manager would investigate the cause and implement corrective actions to bring the project back on track.
3. Cost Forecasting
Cost Forecasting involves predicting the future performance of the project based on past performance data. This process helps in estimating the project's final cost and identifying potential cost overruns. Techniques such as earned value management (EVM) are often used for cost forecasting.
Example: In a marketing campaign, cost forecasting might involve using EVM to compare the planned value of completed activities with the actual value. If the actual value is higher than the planned value, the project manager might forecast a cost overrun and take corrective actions to mitigate it.
4. Change Requests
Change Requests are formal proposals to modify any document, deliverable, or baseline. These requests can originate from various sources, including stakeholders, project team members, or external factors. Managing change requests involves evaluating their impact on the project costs and deciding whether to approve, reject, or defer them.
Example: During a construction project, a change request might be submitted to add a new feature, such as a rooftop garden. The project manager evaluates this request by assessing its impact on the budget and resource allocation. If approved, the change request is documented and integrated into the project costs.
5. Cost Control Tools and Techniques
Cost Control Tools and Techniques are methods used to monitor and control the project costs. These tools include cost update meetings, progress reports, and cost performance analysis. These techniques help in identifying variances, analyzing trends, and taking corrective actions.
Example: For a software development project, cost control might involve regular progress meetings to review the expenditure on coding tasks, testing, and deployment. If the testing phase exceeds the budget, the project manager might allocate additional resources or adjust the costs to ensure the project stays within the budget.