{"id":279,"date":"2022-07-25T13:18:46","date_gmt":"2022-07-25T13:18:46","guid":{"rendered":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/chapter\/9-2-project-cost-management-plan\/"},"modified":"2024-12-28T22:00:28","modified_gmt":"2024-12-28T22:00:28","slug":"9-2-project-cost-management-plan","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/chapter\/9-2-project-cost-management-plan\/","title":{"rendered":"9.2 Project Cost Management Plan"},"content":{"raw":"As described in <a href=\"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/chapter\/4-0-learning-objectives-and-overview\/\">Chapter 4<\/a>, project planning is at the heart of the project life cycle and tells everyone involved where we are going and how we will get there. It involves creating a set of plans to help guide our team through the implementation and closure phases of the project. The project cost management plan is one of the sub-plans of our overall project plan. It provides project managers guidelines on estimating, budgeting, managing, monitoring, and controlling project costs[footnote]Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute.[\/footnote].\r\n\r\nA project cost management plan consists of similar items that we have in a schedule management plan. This plan can consist of the following[footnote]Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute.[\/footnote]:\r\n<ul>\r\n \t<li><strong>Process descriptions<\/strong>[footnote]Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from <a href=\"https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\">https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan<\/a>[\/footnote]\r\n<ul>\r\n \t<li>What processes will be used for cost management?<\/li>\r\n \t<li>These processes include planning, estimating costs, and establishing the overall budget.<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Unit of measurement<\/strong>\r\n<ul>\r\n \t<li>Daily working hours and shifts for human resources and equipment<\/li>\r\n \t<li>Weekends and\/or off-days for especially human resources<\/li>\r\n \t<li>Metric (e.g., meter, liter, kilogram) or imperial (e.g., inch, gallon, pound) system measurement units<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Level of accuracy<\/strong>\r\n<ul>\r\n \t<li>Acceptable range to ensure realistic cost estimates (e.g., \u00b110%, \u00b120)<\/li>\r\n \t<li>Evaluation of the impact of risks on the costs of each activity and overall project based on the project risk management plan<\/li>\r\n \t<li>Methods describing how the cost contingencies will be assessed.<\/li>\r\n \t<li>Procedure to account for fluctuations in currency exchange rates<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Level of precision<\/strong>\r\n<ul>\r\n \t<li>The degree to which cost estimates will be rounded up or down (e.g., $95.55 to $96; $95.45 to $95; $495.75 to $496 or $500)<\/li>\r\n \t<li>Evaluated based on the scope, size, and complexity of the project.<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Cost estimation methods<\/strong>\r\n<ul>\r\n \t<li>Estimation methods (e.g., expert judgment, analogous, parametric, three-point, bottom-up) and when they will be utilized.<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Methods, tools, and software utilized to develop, manage, and monitor project cost<\/strong>\r\n<ul>\r\n \t<li>Specify the organizational procedures and policies if they should be utilized.<\/li>\r\n \t<li>Methods and tools such as control accounts, WBS, project baseline, Earned Value Management, and critical path method<\/li>\r\n \t<li>Reserve analysis to set aside some money for cost overruns due to risks in order to implement risk mitigation strategies.<\/li>\r\n \t<li>Software such as Microsoft Project Professional, Excel, Visio, and Jira (for Kanban and Scrum), and online collaboration tools such as Monday, Trello, and Basecamp.<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Rules for monitoring cost performance<\/strong>\r\n<ul>\r\n \t<li>Earned Value Management (EVM)<\/li>\r\n \t<li>Defining the points in the WBS at which measurement of control accounts will be performed<\/li>\r\n \t<li>How strategic funding choices would be managed.<\/li>\r\n \t<li>Control thresholds for deviations from the parameters in the cost baseline<\/li>\r\n \t<li>Using software such as Microsoft Project<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Reporting formats<\/strong>\r\n<ul>\r\n \t<li>Reporting formats and frequency should be in alignment with other project plans.<\/li>\r\n \t<li>When, how frequently, and to whom are we reporting?[footnote]Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from <a href=\"https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\">https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan<\/a>[\/footnote]<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li><strong>Approval of the cost baseline<\/strong>\r\n<ul>\r\n \t<li>Who will be responsible for preparation and control?<\/li>\r\n \t<li>Who will approve the cost baseline?<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<div>\r\n<div><\/div>\r\n<\/div>","rendered":"<p>As described in <a href=\"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/chapter\/4-0-learning-objectives-and-overview\/\">Chapter 4<\/a>, project planning is at the heart of the project life cycle and tells everyone involved where we are going and how we will get there. It involves creating a set of plans to help guide our team through the implementation and closure phases of the project. The project cost management plan is one of the sub-plans of our overall project plan. It provides project managers guidelines on estimating, budgeting, managing, monitoring, and controlling project costs<a class=\"footnote\" title=\"Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute.\" id=\"return-footnote-279-1\" href=\"#footnote-279-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a>.<\/p>\n<p>A project cost management plan consists of similar items that we have in a schedule management plan. This plan can consist of the following<a class=\"footnote\" title=\"Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute.\" id=\"return-footnote-279-2\" href=\"#footnote-279-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a>:<\/p>\n<ul>\n<li><strong>Process descriptions<\/strong><a class=\"footnote\" title=\"Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\" id=\"return-footnote-279-3\" href=\"#footnote-279-3\" aria-label=\"Footnote 3\"><sup class=\"footnote\">[3]<\/sup><\/a>\n<ul>\n<li>What processes will be used for cost management?<\/li>\n<li>These processes include planning, estimating costs, and establishing the overall budget.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Unit of measurement<\/strong>\n<ul>\n<li>Daily working hours and shifts for human resources and equipment<\/li>\n<li>Weekends and\/or off-days for especially human resources<\/li>\n<li>Metric (e.g., meter, liter, kilogram) or imperial (e.g., inch, gallon, pound) system measurement units<\/li>\n<\/ul>\n<\/li>\n<li><strong>Level of accuracy<\/strong>\n<ul>\n<li>Acceptable range to ensure realistic cost estimates (e.g., \u00b110%, \u00b120)<\/li>\n<li>Evaluation of the impact of risks on the costs of each activity and overall project based on the project risk management plan<\/li>\n<li>Methods describing how the cost contingencies will be assessed.<\/li>\n<li>Procedure to account for fluctuations in currency exchange rates<\/li>\n<\/ul>\n<\/li>\n<li><strong>Level of precision<\/strong>\n<ul>\n<li>The degree to which cost estimates will be rounded up or down (e.g., $95.55 to $96; $95.45 to $95; $495.75 to $496 or $500)<\/li>\n<li>Evaluated based on the scope, size, and complexity of the project.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cost estimation methods<\/strong>\n<ul>\n<li>Estimation methods (e.g., expert judgment, analogous, parametric, three-point, bottom-up) and when they will be utilized.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Methods, tools, and software utilized to develop, manage, and monitor project cost<\/strong>\n<ul>\n<li>Specify the organizational procedures and policies if they should be utilized.<\/li>\n<li>Methods and tools such as control accounts, WBS, project baseline, Earned Value Management, and critical path method<\/li>\n<li>Reserve analysis to set aside some money for cost overruns due to risks in order to implement risk mitigation strategies.<\/li>\n<li>Software such as Microsoft Project Professional, Excel, Visio, and Jira (for Kanban and Scrum), and online collaboration tools such as Monday, Trello, and Basecamp.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Rules for monitoring cost performance<\/strong>\n<ul>\n<li>Earned Value Management (EVM)<\/li>\n<li>Defining the points in the WBS at which measurement of control accounts will be performed<\/li>\n<li>How strategic funding choices would be managed.<\/li>\n<li>Control thresholds for deviations from the parameters in the cost baseline<\/li>\n<li>Using software such as Microsoft Project<\/li>\n<\/ul>\n<\/li>\n<li><strong>Reporting formats<\/strong>\n<ul>\n<li>Reporting formats and frequency should be in alignment with other project plans.<\/li>\n<li>When, how frequently, and to whom are we reporting?<a class=\"footnote\" title=\"Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\" id=\"return-footnote-279-4\" href=\"#footnote-279-4\" aria-label=\"Footnote 4\"><sup class=\"footnote\">[4]<\/sup><\/a><\/li>\n<\/ul>\n<\/li>\n<li><strong>Approval of the cost baseline<\/strong>\n<ul>\n<li>Who will be responsible for preparation and control?<\/li>\n<li>Who will approve the cost baseline?<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div>\n<div><\/div>\n<\/div>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-279-1\">Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute. <a href=\"#return-footnote-279-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-279-2\">Project Management Institute. (2017). A guide to the Project Management Body of Knowledge (PMBOK guide) (6th ed.). Project Management Institute. <a href=\"#return-footnote-279-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><li id=\"footnote-279-3\">Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from <a href=\"https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\">https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan<\/a> <a href=\"#return-footnote-279-3\" class=\"return-footnote\" aria-label=\"Return to footnote 3\">&crarr;<\/a><\/li><li id=\"footnote-279-4\">Harrin, E. (2014) 7 Things for your cost management plan. Retrieved from <a href=\"https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan\">https:\/\/www.projectmanagement.com\/blog-post\/7645\/7-things-for-your-cost-management-plan<\/a> <a href=\"#return-footnote-279-4\" class=\"return-footnote\" aria-label=\"Return to footnote 4\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":3,"menu_order":3,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-279","chapter","type-chapter","status-publish","hentry"],"part":274,"_links":{"self":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapters\/279","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":3,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapters\/279\/revisions"}],"predecessor-version":[{"id":861,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapters\/279\/revisions\/861"}],"part":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/parts\/274"}],"metadata":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapters\/279\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/wp\/v2\/media?parent=279"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/pressbooks\/v2\/chapter-type?post=279"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/wp\/v2\/contributor?post=279"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ulib.csuohio.edu\/projectmanagement2ndedition\/wp-json\/wp\/v2\/license?post=279"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}