COST MANAGEMENT

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2What is Cost Management?

• Process of planning and controlling the budget of the project.

• Cost management predicts the expenditure and reduce the project from going over budget.

3Principles• Cash Flow Analysis (Estimated project cost and

benefit of project organization).• Tangible Cost (Can be measured)

A task that was allocated ₹150,000 but actually costs ₹100,000 would have a tangible benefit of ₹50,000.

• Intangible Cost (Monetary cost) Research related areas

4Principles

• Direct cost (Directly related to project)SalaryPurchase of software

• Indirect cost (Not directly related to project)Electricity billTelephone bill

5Why is it important?

• Identify each of the costs within your project• Ensure that expenses are approved before

purchasing• Keep a central record of all costs incurred• Control the overall cost of your project• Keep your project and financial plans up-to-date

6What does it include?

• Budget • Benefit• Spending• Expenses• Funding• ROI

7How is it done in project?

• Cost Management Plan• Cost Baseline• Activity Cost estimates• Performance Measurements

8Cost in Project Management

Estimate Cost

Determine Budget

Control Cost

9Estimating Cost

• Projected cost of a project.• Analogous Estimating• Parametric Estimating• Bottom-up Estimating• Three-point Estimates• Cost of quality

10Determine Budget

• Cost Aggregation• Reserve Analysis• Historical Data• Funding Limit Reconciliation

11Control Cost

• Earned Value Management

• Forecasting• To-Complete Performance

Index (TCPI)• Variance Analysis• Performance Reviews

12Earned Value Analysis• Planned Value – Total cost estimate planned to be spent

on an activity during a given period• Earned Value– Estimate of the value of the physical

work actually completed• Actual Value– Total of direct and indirect costs

incurred in accomplishing work on an activity

13Rate of Performance• Ratio of actual work completed to the percentage of

work planned to have been completed at any given time.

• For example, suppose the server installation was halfway completed by the end of week 1; the rate of performance would be 50% because by the end of week 1, the planned schedule reflects that the task should be 100% complete and only 50% of that work has been completed.

14Cost Budgeting

• Allocating the project cost estimate to individual work items over time

• Provides info for project funding requirements• Estimating costs for each major project activity

over time• Used to measure and monitor cost performance

15What are the benefits?

• Meeting budget goals.• Realistic project estimates.• Earned value Management• Cost accounts• Rate of performance

16What are the benefits?

• Project is completed within an approved budget.

• Accurate cost estimates and realistic budget.• Return on investment (ROI)

17How does Primavera help?

• Budgeting• Labor cost• Earned Value Report• Cost Variance• Total Project Costing

18How does Primavera help?

• Cost Account• Project Expenses• Manage Currency• Budget Summary• Funding Details

19How Does MSP help?

• Earned Value management• Planned and Actual value• Manage currency• Project expenses

20Pearl river tower

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Thank You