In the case of a project, it helps the project manager estimate what the project will cost and set in place controls by which they can reduce the chance of the project going over budget. For the purposes of this paper, cost management is defined in the pmbok as the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. A summary of pmbok practices cost management brighthub. The term project cost estimate, as used during the project development process, includes all direct capital outlay costs, including right of way, structures, and landscaping, but does not normally include indirect capital outlay support costs. The impact of the project manager on project management planning processes article pdf available in project management journal 333.
To understand the value of project management, it is necessary to understand the fundamental nature of a project. Project management processes free ebook in pdf format. Project cost management for project managers based on. Consolidate the outputs of the other planning processes, including strategic planning, to create a consistent, coherent set of documents that can be used to guide program. Processes that help to estimate, budget, and control cost so as to ensure that the project is completed within the approved budget. A processbased approach,such as lean project management. Description of program management processes initiating. Poor project cost management is one of the easiest ways to make a project go awry. Nor is there an allencompassing solution for controlling all project costs. Cost is one of the key performance indicators for projects.
The cost management plan is contained in, or is a subsidiary plan of, the project management plan and may be formal or informal, highly detailed or broadly framed, based upon the needs of the project. Executing consists of the processes used to complete the work defined in the project plan to accomplish the projects requirements. This plan includes cost management, scheduling, quality management, resource management etc. In this pmp study guide, well cover all the processes in the cost management knowledge area in pmbok 6th edition. Estimating costs developing an approximationestimate of the costs of the resources needed to complete a project. Mar 14, 2018 managing the processes and phases of a project is hard enough. This ebook describes the process of cost management in projects. Trying to do so without the aid of a project management software is asking for trouble. A guide to the project management body of knowledge pmbok guide sixth edition. The pmbok project cost management processes as previously stated, money is usually one of the key constraints of any project and this process is therefore all about defining the budget and managing the actual project costs within it.
The project manager uses project cost management software to develop spreadsheets and make calculations. This is the stage where the actual project output is delivered. Projected costs are calculated during the planning phase of a project and must be approved before work begins. Project cost management for project managers based on pmbok. Execution process involves coordinating people and resources, as well as integrating and performing the activities of the project in accordance with the project management plan. Thankfully, the project management body of knowledge pmbok gives us a strong foundation in this area project cost management is the fourth of 10 project management knowledge areas within. Lean focuses on efficiency and cutting waste and can be applied to nearly every industry. It allows a business to predict coming expenses in order to reduce the chances of it going over budget. Thankfully, the project management body of knowledge pmbok gives us a strong foundation in this area. Dec 04, 2019 cost management is the process by which one plans and manages the budget of a business or project. Project cost management includes the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be completed within t slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Cost management should occur early in project planning in order to establish a framework for all cost management processes and ensure that the project does not go over budget. T d jainendrakumar the cost management includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. Cost management does not happen in isolation the project manager needs input from the project team and key stakeholders.
Project cost estimation is conducted at the planning phase. Therefore, the project management team should have a detailed understanding on all the project management processes and the tools that they can make use for each project management. The scope of the cost management plan is the processes, roles, and tools used to plan and manage project costs throughout the life of the project. Pdf the impact of the project manager on project management. Below is an example and a template for the project cost estimate summary. Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange costs are usually measured in monetary units like dollars project cost management includes the processes required to ensure that the project is completed within an approved budget 6. Cost management process cmp generally refers to the cost analysis portion of project management. Project management processes minnesota department of. Project cost management is the fourth of 10 project management knowledge areas within the pmbok. May 27, 2016 hence, good project management requires a firm grasp on the concepts and techniques in project budgeting and cost control. Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange costs are usually measured in monetary units like dollars project cost management includes the processes required to ensure that the project is. Understand the processes involved in cost budgeting and preparing a cost estimate, and. There are three processes involved with pmbok cost management. Please read chapter 12 from project management institute, a guide to the project management body of knowledge, pmbok guide fourth edition, project management institute, inc.
Usually the cost is measured in currency such as the dollar, euro, or yen. Involved in controlling costs are processes centered around planning, estimating, budgeting, financing, funding and managing costs so that the project can be completed within the approved budget. Cost management is a similar concept, and one of the most critical aspects of project management. Project cost management is the process of bringing as much predictability and control as possible to the expenses of a project. Managing the project budget free ebook in pdf format. Cost control is the part of project management such that cost management processes involved in planning, estimating, budgeting, and controlling costs so that the budget can be completed within the. It is a formalized activity where some of the core downstream financial impacts of a project are systemically identified, approved and paid. Project cost management is one of the most important aspects of project management that you need to master.
Project cost management for project managers based on pmbok by dr. The cost management planning effort occurs early in project planning and sets the framework for each of the cost management processes, so that. Main objectives of develop project management plan are to. The project good project cost management means being able to deliver a quality project on time and within budget. Jun 12, 2008 project cost management includes the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be completed within t slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Cost management is the process of estimating, allocating, and controlling the costs in a project. The third step of project management process is execution. The following cost management activities are documented in this plan. Project cost management definition, process and software.
The project cost management processes pm certification. Processes primarily concerned with the cost of resources required to complete the project activities. Three of these occur in the planning process group as they involve the determination of the project budgets. To manage your project costs effectively, there are three key processes you need to be able to perform. At this stage, endtoend project planning is completed. Pdf cost control is the part of project management such that cost management processes involved in planning, estimating, budgeting, and. Analogous estimating utilizes similar projects or activities and makes the estimates for the current project based upon the past results. It involves knowing, regulating, forecasting, and administering the cost of the project at every. There is no silver bullet for effectively managing project cost. Hence, good project management requires a firm grasp on the concepts and techniques in project budgeting and cost control. But in some situations it could be measured using other units, such as staff hours when developing a cost estimate, you need to consider all of the resources that will be used by the project. At this step of the cost management process, cost spreadsheets are used to develop the budget framework and determine the budget. Project cost management includes all those processes necessary to ensure that the project is.
Surprise expenses are the enemy of any organization, so being able to accurately forecast the costs of a project ahead of time is a key skill to possess. Cost management is the process by which one plans and manages the budget of a business or project. Project cost estimating is the process of approximating how much it will cost to complete the project activities. Choosing the project management technique that works best will depend on the project, the organization, and the project manager. The project management process connects all other project activities together and creates the harmony in the project. This provides an overview of the processes in project cost management.
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