6 1 Plan Cost Management
6.1 Plan Cost Management Explained
Plan Cost Management is a critical process in project management that involves creating a cost management plan. This plan outlines how costs will be estimated, budgeted, managed, and controlled throughout the project lifecycle. It ensures that the project stays within the defined budget and delivers the expected value. Here, we will delve into three key concepts of Plan Cost Management: Cost Management Plan, Cost Baseline, and Cost Control.
1. Cost Management Plan
The Cost Management Plan is a subsidiary plan of the project management plan. It provides detailed guidance on how to manage the project costs. This plan includes procedures for estimating costs, budgeting, and controlling costs. It also defines the level of accuracy, cost control thresholds, and reporting formats.
Example: For a construction project, the cost management plan might include guidelines for estimating the cost of materials and labor, setting a budget for each phase of construction, and defining the process for approving cost overruns. This plan ensures that all team members understand how costs will be managed throughout the project.
2. Cost Baseline
The Cost Baseline is a component of the project management plan that includes the approved project budget. It serves as a reference point for measuring cost performance and managing cost changes. The cost baseline is established during the Plan Cost Management process.
Example: For a software development project, the cost baseline might include the budget for each development phase, such as "Requirements Gathering," "Design," "Development," and "Testing." This baseline ensures that all team members have a clear understanding of the project's budget and can monitor progress against it.
3. Cost Control
Cost Control involves managing changes to the project budget. It ensures that any changes to the budget are properly evaluated, approved, and implemented. Effective cost control helps prevent cost overruns and ensures that the project stays within the defined budget.
Example: For a marketing campaign, cost control might involve a change control process where any proposed changes to the project budget are reviewed by a change control board. The board evaluates the impact of the changes on the project timeline, budget, and quality, and decides whether to approve or reject the changes.