Project cost management (PCM) is a method that uses technology to measure cost and productivity through the full life cycle of enterprise-level projects
PCM encompasses several specific functions of project management including estimating, job controls, field data collection, scheduling, accounting and design.
Beginning with estimating, a vital tool in PCM, actual historical data is used to accurately plan all aspects of the project. As the project continues, job control uses data from the estimate with the information reported from the field, to measure the cost and production in the project. From project initiation to completion, project cost management has an objective to simplify and cheapen the project experience.
This technological approach has been a big challenger to the mainstream estimating software and project management industries.
Project Cost Management is one of the ten Knowledge Areas outlined in the A Guide to the Project Management Body of Knowledge (PMBOK Guide). It is used during the Planning and Monitoring & Controlling Process Groups.
The first step in cost management is to estimate the costs of each activity in the project. Costs include both human resource and physical resource costs. Because this step often occurs in the planning phase, it is important to understand that the estimated costs are your “best guesses” at the actual costs of each activity.
To undertake an informed guess at the costs you can use one of the following techniques:
Using your best-guess estimates, the next step is to create a realistic project budget. In this step, you will determine the cost baseline and the funding requirements for the project. A good project budget will help you make key decisions with respect to the project schedule and resource allocation constraints.
To determine the project budget, the PMBOK suggests using several techniques:
Good project managers will carefully monitor the cost of their projects. This includes watching to see where the actual cost has varied from the estimated cost. Cost control also involves informing the stakeholders of cost discrepancies that vary too much from the budgeted cost.
To effectively control project costs, you will need to regularly monitor and measure the performance of the budget and revise forecasts as required. The PMBOK suggests several tools and techniques help control costs:
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