INSTITUTE – University School of Business

DEPARTMENT - Management
M.B.A.
Project Management - BAT 783

UNIT-2 Lecture 13: Cost Control DISCOVER . LEARN . EMPOWER

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 Project Management
BAT-783

Course Outcomes

CO
Title Level Will Will
be covered
be covered in
Number
To describe the basics of project management
Understand
in this this lecture
lecture
CO1 and project planning
 
To apply project evaluation techniques on real Apply
CO2 life business proposals  
To analyze the risk involved in the internal and
CO3 external project control management Analyze

To enable students in evaluating the

CO4 performance of the project through project Analyze
information management system
To create network diagrams for project
CO4 Analyze
planning and scheduling 2
Cost Control

• Control cost is the final process of ‘Project Cost Management’ which is

primarily concerned with the measurement of variances of the actual cost
and the proposed baseline.

• Various methods and procedures are implemented here to track the

project performance and expenses against its progress rate.

• Meanwhile, all these variances and recorded and compared with actual
cost baseline
Cost Control Process

• Control cost process will be responsible for explaining the reason for
variance and further assist project manager for taking corrective actions
to minimize the cost.
I. Inputs

A. Project Baseline
• Stakeholders measure projects by how well they are executed within the
project constraints or baselines.
• A project baseline is an approved plan for a portion of a project (+/-
changes).
• It is used to compare actual performance to planned performance and to
determine if project performance is within acceptable guidelines. Every
project has at least four project baselines.
• There may be others, depending on the project and definitions used. 
I. Cost Control Inputs

B. Project Baselines in Project Management

• Budget Baseline
• Schedule Baseline
• Scope Baseline
• Quality Baseline
II. Project Budget

• The project budget is a financial plan for all project expenditures (cost).
• Success in project budget management depends on, amongst other
things, the creation of a comprehensive, consistent, and reliable project
budget.
• Some people want to use the term "accurate" in the above definition.
• But, the word "accurate" has no place in the project management world.
Reliable and consistent are the terms that should be used.
Tools to Help Analyze Cost Budget Performance 

Based on the work above, we now have a budget for:

• Individual Activities
• Work Packages
• Deliverables
• The Total Project
Earned Value Method
 
• One other very powerful tool that helps in the analysis of project budget
performance is the Earned Value Method (EVM).
• EVM can assist you in evaluating project budget performance (what are
you accomplishing for the funds you are expending) and in calculating a
Cost Performance Index (CPI), which is a representation of the
effectiveness of your spending.
• EVM can calculate a Cost Variance (CV), which is the difference between
the value of the work completed and the amount of funds expended to
accomplish that work.
Variance Analysis 

•Variance analysis is another tool to help the PM understand why work

elements are over- or under budget.

•The Cost Management Plan probably sets thresholds for overruns (say
10%), a different threshold for under runs (say 15%), to trigger your
attention.
 References

• Tools and techniques for project management: Newton, R., Brilliant Checklists for Project
Managers, 2nd Edition, Pearson Education, 2014

• Overview of project management methodologies: Newton, R., The Practice and Theory of
Project Management, Palgrave MacMillan, 2008

• Chandra, Prasanna, Projects: Planning, Analysis, Selection, Implementation & Review, Tata
McGraw Hill.

• Clifford Gray & Erik Larson, Project Management, Tata McGraw-Hill.

• Nicholas, John M., Project Management for Business & Technology (Principles & Practice),
Pearson Education.

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 Assessment Pattern

Scaled
Components HT-1 HT-2 Assignment Surprise Test Business Quiz GD Forum Attendance
Marks

Max. Marks 10 10 6 4 4 4 2 40

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 THANK YOU

For queries, Email: pardeep.e8925@cumail.in 13