Project Cost Management
Project cost management is an important area of responsibility for project managers; because the project manager should do all process involved in estimating, budgeting and controlling costs in order to complete the project with the approved budget. There are 3 processes in project cost management, there are estimate cost, determine cost and control cost. These processes interact with each other and with processes in the other knowledge area as well. Project cost management is primarily concerned with the cost of the resources needed to complete project activities, and also consider the effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting the product, service, or result of the project.
Figure 1. Project Cost Management Overview
Source : Project Management Institute (2008, p167), A Guide to the Project Management Body of Knowledge
The cost management planning effort occurs early in project planning and sets the framework for each of the cost management processes so that performance of the processes will be efficient and coordinate. Project cost management should consider stakeholder requirements (cost of an item when decision is made, order is placed, item is delivered, actual cost is incurred or recorded for project accounting) and effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting the product, service.
The cost management processes and their associated tools and techniques are usually selected during the project life cycle definition and are documented in the cost management plan. The cost management plan, either formal or informal, highly detailed or broadly framed can establish: level of accuracy, organizational procedures links, control thresholds, rules of performance measurement, reporting format (format and frequency of cost reports) and process description.