Plan Cost Management in project management (PMP ) is the process of figuring out how to predict, budget, manage, keep an eye on, and control the project costs. This process is most helpful because it tells you how to handle the project’s prices during the whole thing. This step is either done only once or at set times during the job. Figure below shows the process’s inputs, tools and methods, and outputs.
Cost management planning starts early in the project planning process and sets the framework for all cost management processes so that they work well together and efficiently. The cost management plan lists the steps for managing costs and the tools and methods that go with them. Part of the project management plan is the cost management plan.
Plan Cost Management: Inputs
Project Charter
To get an accurate idea of how much the project will cost, the project charter lists the accepted funding sources. The project plan also lists the approval requirements, which will have an effect on how the project costs are managed.
Project Management Plan
The following are some of the parts of a project management plan:
- The schedule management plan lays out the rules and tasks that will be used to make, keep an eye on, and handle the schedule. The schedule management plan lays out steps and limits that will have an effect on estimating and managing costs.
- The risk management plan lays out how to find problems, analyze them, and keep an eye on them. The risk management plan includes steps and checks that will have an effect on estimating and managing costs.
Enterprise Environmental Factors
Among other things, the following Enterprise Environmental Factors can affect the Plan Cost Management process:
- Culture and structure of an organization can have an effect on how costs are managed.
- The conditions of the market show what goods, services, and outcomes are offered in the local and international markets.
- Costs for projects are based on exchange rates from more than one country.
Organizational Process Assets
The following are some examples of Organizational process assets that can have an effect on the Plan Cost Management process:
- Financial controls procedures ;
- Historical information and lessons learned repository;
- Financial databases; and
- Existing formal and informal cost estimating and budgeting-related policies, procedures, and guidelines
Plan Cost Management (PMP): Tools And Techniques
Expert Judgment
You should look at the information and experience of people or groups who are experts in the following areas:
- Previous similar projects;
- Information in the industry, discipline, and application area;
- Cost estimating and budgeting; and
- Earned value management
Data Analysis
If you want to use a data analysis method for project management budget planning task, you can, for example, use options analysis. When you do an alternatives analysis, you might look at different ways to get money, like self-funding, funding with stock, or funding with debt. It can also include thinking about how to get the things you need for the project, like whether to make them, buy them, rent them, or lease them.
Meetings
To make the cost management plan, project teams may get together for planning talks. The project manager, the project sponsor, some project team members, some clients, the person or people responsible for the project’s costs, and others as needed may all be there.
Plan Cost Management: Outputs
Cost Management Plan
The cost management plan is part of the project management plan. It walks you through how to plan, organize, and keep track of the project’s prices. The cost management plan lists the steps for managing costs and the tools and methods that go with them.
The cost management plan might set up the following, for instance:
Units of measure
Time units like staff hours, staff days, or weeks are outlined, as are units of measure for amount (meters, liters, tons, kilometers, or cubic yards), and money units (lump sum).
Level of precision
There will be a certain amount of rounding up or down of cost estimates (for example, from US$995.59 to US$1,000), depending on the activities and size of the job.
Level of accuracy
It says what an acceptable range (like ±10%) is for making accurate cost predictions, and it may include a buffer amount.
Organizational procedures links
The work breakdown structure (WBS) is the plan for managing costs. It makes sure that the figures, budgets, and cost control are all the same. The control account is the part of the WBS that is used to keep track of the project’s costs. Every control account has its own code or account number that connects to the accounting system of the company doing the work.
Control thresholds
Specifying variance limits for cost performance monitoring can help people agree on how much variation they can handle before they need to take action. It is common to talk about thresholds in terms of percentage changes from the basic plan.
Rules of performance measurement
Earned value management (EVM) rules of performance measurement are set in project management budget planning.
Reporting formats
It’s clear what forms and how often to use for the different cost reports.
Additional details
This list doesn’t include everything, but it does include more information about cost management activities in cost management plan (pmp) :
- Description of strategic funding choices,
- Procedure to account for fluctuations in currency exchange rates, and
- Procedure for project cost recording.
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