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Project Cost

Management

6th Lecture

1. ControlCostProcess(Inputs,Tools,Outputs)
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WhatLiteratureSaysaboutControlCost

The key to effective cost control is


the management of approved
cost performance baseline
and changes
g to it.

Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.

HowtoControlProjectCost
1 Influencing the factors that create changes to authorized
1.
cost baseline
baseline..
2. Prevent unapproved
pp
changes
changes.
g . Informingg the stakeholders
about approved changes and associated costs
costs..
3. Ensuring that all change requests are acted in timely
manner..
manner
4. Ensuring expenditures dont exceed authorized funding by
period and in total
total..
5. Monitoring cost performance to understand variances from
cost baseline
baseline..
6. Monitoring work performance against funds expensed
expensed..
7. Acting to bring expected cost overruns within limits
limits..
Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.

InputsControlCostProcess

1
1.

2
2.

3
3.

4.

Project Management Plan.


Plan
Cost Management Plan. (How the project cost will be managed)
Cost Performance Baseline. (Output of Estimate Budget Process)
P j t Funding
Project
F di Requirement.
R
i
t Total
T t l funding
f di requirements
i
t and
d periodic
i di funding
f di
requirements are derived from cost baseline. Funding often occur in incremental
amounts.
Work Performance Information.
Information
Information project progress
( Which deliverables have started, Progress, and finished).
Costs
C
that
h have
h
b
been
authorized
h i d and
d incurred.
i
d
Organizational Process Asset.
Existing Formal and informal cost control policies, procedures and
guidelines.
id li
Cost control tools and Monitoring and reporting methods.
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Outputs
Outputs
ControlCostProcess
ControlCostProcess
1 Work Performance Measurement.
1.
Measurement
2 Cost Forecasts.
2.
Forecasts
3 Change
3.
Ch
R
Requests.
t
4 Project
4.
P j Management
M
Pl Updates.
Plan
U d
5. Project Document updates.
6. Organizational Process Assets updates.
Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.

EarnedValueManagement(EVM)

ElementsofEVM
ElementsofEVM
PV
PV

ScheduleVariance
SV = EV PV

SV is the monetary
y difference between the earned value ((BCWP)) and the schedule
baseline (BCWS).

Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.

Cost variance
CV = EV AC

CV it is the difference between the estimated cost to reach the present level of conclusion (BCWP)
and the actual incurred cost (ACWP),
(ACWP) up to the status date or present date.
date

Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.

SPIandCPI
SPI is the ratio between the earned value (BCWP) and the planned value
as in the baseline (BCWS)
(BCWS)..
If SPI < 1 It Indicates Less work was completed than planed
planed..

EV
SPI =
PV

Cost Performance index is a measure of work completed compared to


actual cost or progress made on the project
project.. It measures the cost efficiency
for
f the
h workk completed
completed.
l d.
If CPI < 1 It Indicates cost over run for work completed
completed..
EV
If CPI > 1 It Indicates cost under run of performance
performance..

C
CPI
=

AC

Not for Sale , Print or Copy . Only for education inside the classroom. M.Shoaib Naqshbandi MPM-SZABIST Islamabad. 2014.