Working with Costs and Budgeting

Project cost management is one of the many knowledge areas, or disciplines, required for a successful project execution. Simply put, effective project cost management ensures that the project is completed within the approved budget. Processes associated with project cost management include the following:

Resource planning      After you determine the types and quantities of resources needed for the project, you can estimate costs for those resources. You obtain work resources by hiring staff through human resources processes. You obtain contract staff, material resources, and equipment resources through procurement processes. You then enter those resources into your project plan and assign them to tasks .

Cost estimating       Top-down cost estimating is the practice of using the actual cost of a previous similar project as the basis for estimating the cost of the current project. Bottom-up cost estimating involves estimating the cost of individual tasks and then summarizing those estimates to arrive at a project cost total. The estimate should take into consideration labor, materials, supplies , and any other costs. With Microsoft Project, you can see the planned costs of resources, as well as the fixed costs associated with tasks. Microsoft Project can total all costs to give you a reliable estimate of how much it will cost to implement the project.

Cost budgeting      The budget can allocate certain amounts to individual phases or tasks in the project. Or the budget can be allocated to certain time periods in which the costs will be incurred. The cost estimate and the project schedule ”with the scheduled start and finish dates of the different phases, tasks, milestones, and deliverables ”are instrumental to developing the project budget.

Cost control      This process controls changes to the project budget. Cost control addresses the manner in which cost variances will be tracked and managed, and how cost information will be reported . A cost management plan can detail cost control procedures and corrective actions.