Anticlue

Controlling Project Costs

Controlling Cost in a project is the only way to assure the within budget part of a successful project. Cost control involves being diligent of about requested changes and handling those changes through the integrated change control process. A change request can vary between a potential overrun of authorized funding to inappropriate resource usage.

As with all things PMI, there are inputs, tools and techniques, and outputs of cost control.
The inputs are:

• Performance reports – Performance reports provide the actual costs and resource usage based upon completed work. Performance reports yield information on work progress, some common formats are the bar chart, S-curves, histograms, table, and network diagrams which illustrate the current schedule status.
• Approved change requests – An approved change request is one that has been successfully through the Integrated Change Control process and given the stamp of approval.
• Cost Baseline – The cost baseline is a time-phased budget. The purpose of the cost baseline is to provide a basis against which to measure, monitor, and control the overall project’s cost performance.
• Project funding requirements – Project funding requirements are based upon the cost baseline and contingency reserves. Let’s say that a task is running late and there is a change request to add another resource. A PM may look at the baseline and contingency reserves to determine the money is available.
• Project Management Plan - The Project Management Plan and its subsidiary cost management plan details the organizational policies and procedures which need to be followed.
• Work performance information – Work performance information contains the current status on deliverables, costs, and the schedule.

There are common tools and techniques which PMs use to control costs. They are:

• Cost change control system – The cost change control system is a component of integrated change control. Defined in the cost management plan, the change control system lists how cost changes are handled and what is needed to handle these changes.
• Performance measurement analysis – Performance measurement analysis is the usage of the earned value techniques to identify variances and determine if corrective action is needed.
• Forecasting – Forecast is how estimates or prediction of the project’s future are made. This process includes the calculation of EAC, BAC, and ETC.
• Project performance reviews – Project performance reviews compare the activity costs over time, scheduled activities, and milestone progress.
• Project management software – PMIS can be utilized to track costs and forecast the effect of changes on estimated costs. This information can be used to support suggested changes.
• Variance management – Variance management illustrates the varying degrees of variances should be managed. The various management techniques to use on a project are commonly found in the Cost Management Plan. Ideally there is a different way of handling small variances to large variances.

So after engaging in the cost control process, what are the end results? The outputs of controlling cost are:

• Cost estimate updates – Cost estimate updates are approved changes that result in an update to the project documents which depict cost information – normally the activity cost estimate document.
• Recommended corrective actions – Recommended corrective actions are steps which should be by the project management team to ensure that any future work supports the current Project Management Plan.
• Forecasted completion – Forecasted completion is the calculated estimate at completion or the estimate to completion. This value is communicated to the stakeholders and sponsors.
• Requested changes – Request changes are normally resulting from the recommended corrective actions.
• Organizational process assets updates – Organizational process updates are the enhancement added to the organizational process documents. For example, lessons learned on why a schedule variance occurred and how it was resolved.
• Performance measurements – Performance measurement are the calculated earned values used to monitor project cost performance. Typically the CV, CPI. SV, and SPI.
• Cost baseline updates – Cost baseline updates are approved changes to the current cost baseline. By updating the baseline one can use it as a realistic measure against which project cost performance can be judged.
• Project Management Plan updates – Project Management Plan updates encompass any approved changes to the project management plan or any subsidiary management plans.

A key point is that one measure a pm can take to assure a successful project is to control the costs of that project.