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COST MANAGEMENT
 What is Cost Management? 2

• Process of planning and controlling the budget of

the project.
• Cost management predicts the expenditure and
reduce the project from going over budget.
 Principles 3

• Cash Flow Analysis (Estimated project cost and

benefit of project organization).
• Tangible Cost (Can be measured)
 A task that was allocated ₹150,000 but actually
costs ₹100,000 would have a tangible benefit of
₹50,000.
• Intangible Cost (Monetary cost)
 Research related areas
 Principles 4

• Direct cost (Directly related to project)

 Salary
 Purchase of software
• Indirect cost (Not directly related to project)
 Electricity bill
 Telephone bill
 Why is it important? 5

• Identify each of the costs within your project

• Ensure that expenses are approved before
purchasing
• Keep a central record of all costs incurred
• Control the overall cost of your project
• Keep your project and financial plans up-to-date
 What does it include? 6

• Budget
• Benefit
• Spending
• Expenses
• Funding
• ROI
 How is it done in project? 7

• Cost Management Plan

• Cost Baseline
• Activity Cost estimates
• Performance Measurements
Cost in Project Management 8

Estimate Cost
Determine Budget
Control Cost
 Estimating Cost 9

• Projected cost of a project.

• Analogous Estimating
• Parametric Estimating
• Bottom-up Estimating
• Three-point Estimates
• Cost of quality
 Determine Budget 10

• Cost Aggregation
• Reserve Analysis
• Historical Data
• Funding Limit Reconciliation
 Control Cost 11

• Earned Value
Management
• Forecasting
• To-Complete Performance
Index (TCPI)
• Variance Analysis
• Performance Reviews
 Earned Value Analysis 12

• Planned Value
– Total cost estimate planned to be spent
on an activity during a given period
• Earned Value
– Estimate of the value of the physical
work actually completed
• Actual Value
– Total of direct and indirect costs
incurred in accomplishing work on an
activity
 Rate of Performance 13

• Ratio of actual work completed to the percentage of

work planned to have been completed at any given
time.
• For example, suppose the server installation was
halfway completed by the end of week 1; the rate of
performance would be 50% because by the end of
week 1, the planned schedule reflects that the task
should be 100% complete and only 50% of that work
has been completed.
 Cost Budgeting 14

• Allocating the project cost estimate to individual

work items over time
• Provides info for project funding requirements
• Estimating costs for each major project activity
over time
• Used to measure and monitor cost performance
 What are the benefits? 15

• Meeting budget goals.

• Realistic project estimates.
• Earned value Management
• Cost accounts
• Rate of performance
 What are the benefits? 16

• Project is completed within an approved

budget.
• Accurate cost estimates and realistic budget.
• Return on investment (ROI)
 How does Primavera help? 17

• Budgeting
• Labor cost
• Earned Value Report
• Cost Variance
• Total Project Costing
 How does Primavera help? 18

• Cost Account
• Project Expenses
• Manage Currency
• Budget Summary
• Funding Details
 How Does MSP help? 19

• Earned Value management

• Planned and Actual value
• Manage currency
• Project expenses
Pearl river tower 20
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Thank You