7.1 Plan Cost Management

It is the process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.

The key benefit: provides guidance and direction on how the project costs will be managed.

Frequency: once or at predefined points in the project.

Process/ Org.Assets	Input	The process	Output	Process/ Org.Asset
4.1 Develop Project Charter	Project charter	7.1 Plan Cost Management	Cost management plan	Project Management Plan
Project Management Plan	Schedule management plan
	Risk management plan
Enterprise/ Organization	Enterprise environment factors
	Organizational process assets

The process begins early in project planning. The cost management plan processes and their associated tools and techniques are documented in the cost management plan.

7.1.1 Inputs

7.1.1.1 Project Charter

Provides preapproved financial resources for detailed costs development. Plus the project approval requirements.

7.1.1.2 Project Management Plan

• Schedule management plan. Criteria and the activities for developing, monitoring, and controlling the schedule. Processes and controls.
• Risk management plan. The approach for identifying, analyzing, and monitoring risks. Processes and controls.

7.1.1.3 Enterprise Environmental Factors

Include:

• Organizational culture and structure.
• Market conditions.
• Currency exchange rates.
• Published commercial information. Price lists. HR averaged salaries.
• PMIS.
• Productivity differences in different parts of the world.

7.1.1.4 Organizational Process Assets

Include:

• Financial controls procedures (accounting codes, time reporting, ...)
• Historical information and lessons learned repository.
• Financial databases.
• Existing formal and informal cost estimating and budgeting-related policies, procedures, guidelines.

7.1.2 Tools and Techniques

7.1.2.1 Expert Judgement

Topics:

• Previous similar projects;
• Information in the industry, discipline, application area;
• Cost estimating and budgeting;
• Earned value management.

7.1.2.2 Data Analysis

• Alternatives analysis.
  • Self-funding,
  • Funding with equity,
  • Funding with debt.
  • ----
  • Making
  • Purchasing
  • Renting
  • Leasing

7.1.2.3 Meetings

7.1.3 Outputs

7.1.3.1 Cost Management Plan

It describes how the project costs will be planned, structured, controlled. It is documented in the cost management plan.

Can establish:

• Units of measure.
• Level of precision.
• Level of accuracy.
• Organizational procedures links. WBS -> the framework for the cost management plan. The control account: a WBS component used in the cost accounting.
• Control thresholds. Variance thresholds for monitoring cost performance.
• Rules of performance measurement. EVM rules. May:
  • Define the points in the WBS at which measurement of control accounts will be performed;
  • Establish the EVM techniques:
    • Weighed milestones,
    • Fixed-formula,
    • Percent complete.
  • Specify tracking methodologies and the EVM computation equations for calculating estimate at completion (EAC) to provide a validity check on the bottom-up EAC.
• Report formats. Report formats and frequencies.
• Additional details.
  • Description of strategic funding choices;
  • Procedure to account for fluctuations in currency rates;
  • Procedures for project cost recording.