ALPHA UNIVERSITY COLLEGE

Department of project management

Course Name Project Cost Management

Group Assignment on Project Cost Control and Monitoring

Submitted to: - Dr. Biruk Ayalew

Submitted BY: - Group 2

Name ID NO

1. Abebe Chalew--------------------------------------- MPMD/20/007/15

2. Sofonias Abreham ---------------------------------- MPMD/20/010/15

3. Minilike Nigussu ----------------------------------MPMD/20/033/15

4. Mulunehe sisaye ---------------------------------- MPMD/20/018/15

5. Aray getahune ---------------------------------- MPMD/20/046/15

6. Emebet nora ---------------------------------- MPMD/20/032/15

7. Ermias Mekonnen------------------------------------ MPMD/20/025/15

JAN 2024

Addis Ababa/Ethiopia
1. Definition and Objectives

Project cost control and monitoring refer to the processes and activities undertaken
to track, analyze, and manage project costs throughout its lifecycle. The primary
objectives of cost control and monitoring include:

1. Ensuring adherence to the approved budget.

2. Identifying and addressing cost overruns or deviations.

3. Optimizing resource allocation.

4. Enhancing project profitability and return on investment.

5. Providing accurate cost information for decision-making.

6. Benefits and Significance:

2. Benefit of Effective cost control and monitoring

o Improved financial management: It helps in maintaining financial discipline

and preventing cost overruns.

o Enhanced project performance: By tracking costs, project managers can

identify areas that require attention and take corrective actions.

o Informed decision-making: Accurate cost information enables effective

decision-making regarding resource allocation, scope changes, and risk
management.

o Stakeholder satisfaction: Meeting budgetary expectations enhances

stakeholder satisfaction and trust.

o Alignment with organizational goals: Cost control ensures projects align with
strategic objectives and financial viability.
3. Impact on Project Success:

Project cost control and monitoring significantly contribute to project success by:

o Preventing budget overruns that can jeopardize project completion.

o Improving resource allocation and utilization.

o Enabling effective risk management and contingency planning.

o Facilitating timely decision-making.

o Providing accurate financial reporting for stakeholders.

4. Cost Control and Monitoring Processes:

o Cost Estimation:

Cost estimation involves developing an estimate of the project's total cost based on
the scope, deliverables, resources, and assumptions. Estimation techniques may
include analogous estimation, parametric estimation, or bottom-up estimation.

o Cost Budgeting:

Cost budgeting involves allocating the estimated project costs to specific activities,
work packages, or timeframes. A cost baseline is established to compare actual
costs during project execution.

o Cost Tracking:

Cost tracking entails monitoring and recording actual costs incurred during project
execution. It involves collecting data on labor, materials, equipment, subcontractors,
and other project expenses.

o Cost Analysis and Reporting:

Cost analysis involves comparing actual costs against the budgeted amounts to
identify variances, trends, and deviations. Cost reports are generated to
communicate the project's financial status to stakeholders and project teams.
5. Cost Control Techniques

o Project Baseline:

Establishing a project baseline involves freezing the approved budget, scope, and
schedule. Any subsequent changes are evaluated against this baseline to assess
their impact on project costs.

o Earned Value Management (EVM):

EVM is a technique that integrates cost, schedule, and scope to measure project
performance. It compares the earned value (the value of work completed) against
the actual costs and planned value to assess project efficiency and variances.

o Variance Analysis:

Variance analysis compares actual costs with the budgeted amounts to identify cost
deviations. Positive variances (under budget) and negative variances (over budget)
are analyzed to determine their causes and take corrective actions.

o Change Management:

Effective change management processes and controls ensure that scope changes
are properly evaluated, approved, and their cost implications are assessed before
implementation. This helps prevent cost overruns due to uncontrolled scope creep.

o Risk Management:

Integrating risk management into cost control involves identifying potential risks,
assessing their impact on project costs, and developing mitigation strategies.
Contingency reserves can be allocated to address known risks.

o Resource Allocation and Optimization:

Optimizing resource allocation ensures that resources are utilized efficiently,

minimizing unnecessary costs. It involves monitoring resource usage, addressing
bottlenecks, and reallocating resources as needed.
 o Procurement Management:

Effective procurement practices help control costs related to purchasing goods and
services. This includes conducting vendor selection, negotiating contracts,
monitoring supplier performance, and managing contract changes.

6. Key Cost Control and Monitoring Tools:

o Project Management Software:

Project management software, such as Microsoft Project, Primavera, or JIRA,

provides features for cost estimation, budgeting, tracking, and reporting. It
automates calculations, generates reports, and facilitates collaboration.

o Spreadsheets and Templates:

Spreadsheets, like Microsoft Excel or Google Sheets, can be used to create

customized cost tracking templates, perform calculations, and analyze cost data.
They provide flexibility and are widely accessible.

o Cost Tracking Systems:

Specialized cost tracking systems, such as enterprise resource planning (ERP)

software or dedicated cost management tools, offer comprehensive functionality for
tracking and analyzing project costs.

o Financial Management Systems:

Integration with financial management systems, like QuickBooks or SAP, allows

seamless synchronization of project cost data with organizational financial records.
It ensures accurate and up-to-date cost reporting.
7. Cost Control and Monitoring in Different Project Phases:

o Initiation Phase:

During project initiation, preliminary cost estimates and budgets are developed
based on high-level requirements and assumptions. Cost control measures are
established, and ongoing cost monitoring processes are planned.

o Planning Phase:

In the planning phase, cost estimation is refined, and detailed budgets are developed.
Cost control plans, including change control processes and risk management
strategies, are established. The cost baseline is established, and cost-tracking
methods are defined.

o Execution Phase:

In the execution phase, project costs are tracked and monitored against the baseline.
Actual costs are recorded, and progress is measured using techniques like EVM.
Changes to the project scope or budget are evaluated and managed following the
established change control processes.

o Monitoring and Control Phase:

In this phase, regular cost analysis and reporting are performed to identify variances
and trends. Corrective actions are taken to address cost overruns, and risk
mitigation strategies are implemented. Resource utilization and procurement
activities are closely monitored.

o Closing Phase:

During project closure, final cost reports are prepared, and a post-project evaluation
is conducted. Lessons learned are documented, and cost-related insights are
captured for future projects.

8. Challenges and Mitigation Strategies:

 o Scope Creep:

Scope creep refers to uncontrolled expansion of project scope, leading to increased

costs. Mitigation strategies include maintaining a robust change control process,
clearly defining project scope, and involving stakeholders in scope decisions.

o Inaccurate Cost Estimation:

Inaccurate cost estimation can result in budget shortfalls. To mitigate this, historical
data, expert judgment, and estimation techniques should be used. Regular cost
reviews and comparisons with similar projects can help refine future estimates.

o Inadequate Data and Information:

Lack of accurate and timely data can hinder cost control efforts. Mitigation
strategies involve implementing systems and processes for collecting and
maintaining reliable cost data, leveraging technology tools, and ensuring
collaboration among project stakeholders.

o Poor Change Management:

Inadequate change management processes can lead to uncontrolled scope changes

and additional costs. To address this, establish a formal change control process,
assess the impact of proposed changes on cost, and obtain appropriate approvals
before implementation.

o Communication and Collaboration Issues:

Poor communication and collaboration among project team members can lead to
misunderstandings, delays, and cost overruns. Foster effective communication
channels, promote collaboration and ensure that stakeholders are informed and
engaged.