Project Cost Management
A project is not like typical operations which earn money for the organization, during the life of a project. Projects are funded by a sponsor based on the benefits which he perceives. A project exists to create a unique product, service, or results. This output of the project is useful only after the project is complete and the project output (product, service, or result) is handed over to the user. In a long-term project getting needed funding throughout the project lifecycle (PLC) is extremely important for project success. Therefore it necessary for a project manager to understand
- Overall how much money is required for the project
- How much money is required for what deliverable and activity
- At what point of time money is required in PLC
- Who is funding the project?
- Why are they funding this project? What output do they expect?
- How to convince the sponsor that the value of deliverables is as per the plan?
- How to convince the customer, user, manager that there is a cost involved in incorporating a change therefore change should be funded?
- Establish funding requirements.
- Tracks cost of incorporating changes against the plan.
- Separately manage funds required to manage risk.
- Establish cost tracking and reporting systems.
- Understand risk tolerance and risk appetite of stakeholders, so that estimation can consider that input.
- What are the different types of costs, which a project should estimate, baseline, track and report?
- How and who will estimate the cost?
There are different Contract Types and based on the contract performance money is released by the sponsor as per the contract. A project also needs to purchase different kinds of products, services, or results from different vendors. So, different kinds of contracts are signed with vendors. Based on the vendor’s contract performance project also need to pay to the vendors.
To manage all these aspects of cost in the project there are 4 processes in this knowledge area