Project Cost Management
Project cost management includes a series of activities of estimation, allocating, and controlling the project cost. It involves the determination and approval of the budget for the project. Project cost management is specific and unique for each project, irrespective of the field.
Process
Similar to other project management task, project cost management also has a process. The process has four steps.
- Resource Planning: Resource planning is the process of determining the resources and the quantities needed for each resource. Resource planning must be coordinated closely to perform the project activities effectively.
- Cost Estimation: In this step, the project manager coordinates with the finance department to estimate the cost required for all the goods/services needed for the project. Cost estimation is executed during the planning phase. Project cost management software is used to make calculations and develop spreadsheets.
- Cost Budgeting: Cost Budgeting steps involve developing the budget framework based on the cost spreadsheets. The project manager has to work with the finance department to determine the source of funding, allocation of budget and determining budget items. This step requires close cooperation with the sponsor of the project.
- Cost Control: The cost control step involves the process of reviewing and tracking the budget and reviewing the budget. The project manager has to take the responsibility of controlling the spending and ensuring the optimization of budget allocation.
Tools and Techniques
- Analogous Estimation: It is a top-down approach. The actual cost of any project is estimated based on the actual cost of the previous similar project. This method is used in the absence of detailed information.
- Parametric Modeling: The project parameters are used in a mathematical model to predict the cost of the project. The method is used when the parameters are quantifiable.
- Bottom-up Estimation: In this approach, the estimation depends on individual work items of the project. The size of the project determines the accuracy of the estimation.
- Computerized Tools: Project Management Software and spreadsheet help to a great extent. These products reduce the time of estimation.
Join Synergy School of Business Skills
Now you can project cost management course at Synergy School of Business Skills. Synergy School of Business Skills is a division of CADD Centre. It is the largest network of management training institute in India. It provides short-term programs in project management, people skills, corporate/life skills, and operational excellence.
