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UCMSS09 Project Management

PROJECT COST MANAGEMENT
Erciyes University
Department of Aeronautical Engineering
Melih YILDIZ

• Project Cost Management includes the processes involved in

planning, estimating, budgeting, financing, funding, managing, and
controlling costs so that the project can be completed within the
approved budget.

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• 7.1 Plan Cost Management—The process that establishes the

policies, procedures, and documentation for planning, managing,
expending, and controlling project costs.
• 7.2 Estimate costs—The process of developing an approximation of
the monetary resources needed to complete project activities.
• 7.3 Determine Budget—The process of aggregating the estimated
costs of individual activities or work packages to establish an
authorized cost baseline.
• 7.4 Control costs—The process of monitoring the status of the project
to update the project costs and managing changes to the cost
baseline.

• On some projects, especially those of smaller scope, cost estimating

and cost budgeting are tightly linked and can be viewed as a single
process that can be performed by a single person over a relatively
short period of time.
• These are presented here as distinct processes because the tools and
techniques for each are different.

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• Project Cost Management is primarily concerned with the cost of the

resources needed to complete project activities.
• Project Cost Management should 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.
• For example, limiting the number of design reviews can reduce the
cost of the project but could increase the resulting product’s
operating costs.

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7.1 Plan Cost Management

• Plan Cost Management is the process that establishes the policies,
procedures, and documentation for planning, managing, expending,
and controlling project costs.
• The key benefit of this process is that it provides guidance and
direction on how the project costs will be managed throughout the
project.

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7.2 Estimate costs

• Estimate Costs is the process of developing an approximation of the
monetary resources needed to complete project activities.
• The key benefit of this process is that it determines the amount of
cost required to complete project work.

7.2 Estimate costs

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7.3 determine Budget

• Determine Budget is the process of aggregating the estimated costs of
individual activities or work packages to establish an authorized cost
baseline.
• The key benefit of this process is that it determines the cost baseline
against which project performance can be monitored and controlled.

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7.4 control costs

• Control Costs is the process of monitoring the status of the project to
update the project costs and managing changes to the cost baseline.
• The key benefit of this process is that it provides the means to
recognize variance from the plan in order to take corrective action
and minimize risk.

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• Updating the budget requires knowledge of the actual costs spent to

date.
• Any increase to the authorized budget can only be approved through
the Perform Integrated Change Control process (Section 4.5).
Monitoring the expenditure of funds without regard to the value of
work being accomplished for such expenditures has little value to the
project, other than to allow the project team to stay within the
authorized funding.
• Much of the effort of cost control involves analyzing the relationship
between the consumption of project funds to the physical work being
accomplished for such expenditures.

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• Questions?

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