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.

The Project Cost Management processes are: 

  • *Plan Cost Management.

  •  The process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.  

  • *Estimate Costs.

  •  The process of developing an approximation of the monetary resources needed to complete project work.  

  • *Determine Budget.

  •  The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.  

  • *Control Costs.

  •  The process of monitoring the status of the project to update the project costs and manage changes to the cost baseline.  

Figure 7.1 provides an overview of the Project Cost Management processes. The Project Cost Management processes are

presented as discrete processes with defined interfaces. These processes interact with each other and with processes in other Knowledge Areas.  

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. They are presented here as distinct

processes because the tools and techniques for each are different. The ability to influence cost is greatest at the early

stages of the project, making early scope definition critical.

Project Cost Management is primarily concerned with the cost of the resources needed to complete project activities.

Project Cost Management should 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.  

Another aspect of cost management is recognizing that different stakeholders measure project costs in different

ways and at different times. For example, the cost of an acquired item may be measured when the acquisition decision is made

or committed, the order is placed, the item is delivered, or the actual cost is incurred or recorded for project accounting purposes.

In many organizations, predicting and analyzing the prospective financial performance of the project's product is performed outside of the project.

In others, such as a capital facilities project, Project Cost Management can include this work. When such predictions and analyses are included,

Project Cost Management may address additional processes and numerous general financial management techniques such as return on investment,

discounted cash flow, and investment payback analysis. 

Because each project is unique, the project manager may need to tailor the way Project Cost Management processes are applied.

Considerations for tailoring include but are not limited to:  

  • *Knowledge management.

  •  Does the organization have a formal knowledge management and financial database

  • repository that a project manager is required to use and that is readily accessible?  

  • *Estimating and budgeting.

  •  Does the organization have existing formal or informal cost estimating and budgeting-related policies, procedures, and guidelines?  

  • *Earned value management.

  •  Does the organization use earned value management in managing projects?  

  • *Use of agile approach.

  •  Does the organization use agile methodologies in managing projects? How does this impact cost estimating?  

  • *Governance.

  •  Does the organization have formal or informal audit and governance policies, procedures, and guidelines? 

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