Project Cost Management is an area of PMBOK that organizes project management methodologies and consists of a process for planning, estimating, budgeting, financing, securing funds, managing, and controlling costs to complete projects within approved budgets(PMBOK, 6th Edition) P.24).
In other words, project cost management is a set of cost management to keep up with your planned budget.
In addition to meeting deadlines as PM, it is also important to adjust budgets while looking at the balance of QCD (Quallity: quality, Cost, delivery: delivery: delivery).
In order to shorten the construction period of the project, if you spend more people and funds than planned (critical path), you can recover the delivery time by spending money by caching, but it will be difficult to recover if you exceed the budget.
To that end, it is important to be able to sense signs that you may exceed your budget.
First, let's look at each process group that forms the basis of project cost management.
PROJECT COST MANAGEMENT PROCESS
when implementing project cost management, it is a good idea to do so by the following process.
1. COST MANAGEMENT PLANNING
Create a cost management plan as an auxiliary plan for the project management plan.
Based on the WBS created in project schedule management, let's calculate an estimate of how many people will be appointed and how much it will cost for each work task. For more information, please refer to the Schedule Management article.
2. COST MANAGEMENT ESTIMATES
Estimate project costs by taking into account personnel planning and other items in the scope baseline (project scope description, WBS, etc.), which is the output of scope management.
A process is strongly related to the process of estimating the resources that occur in a work task. Let's look for cost estimates and the rationale for estimates.
When checking estimates received from contractors, let's have the estimate rationale clearly clarified, discuss in advance the unclear parts and risks, and manage issues so that fixed-point observation can be made when problems occur.
3. SET YOUR BUDGET
create a cost baseline with estimates and schedules developed during the cost estimating process. we will allocate specifically over time which expenses are consumed, when, and how much.
based on this cost baseline, we will set up a few milestones to control costs.
4. COST CONTROL
then, compare the cost baseline with the actual report to check the differences, and if there is a problem, investigate the cause and try to improve it.
let's control changes to costs by making change requests as needed in the unified management process.
HOW CAN I USE IT IN PRACTICE?
So far, we've looked at the underlying processes of cost management.
In the first place, the purpose of cost management is to keep expenses within the scope of the plan (budget). Within a limited budget, it is important to adjust according to changes in the field. To detect budget overruns, you need to understand the baselines you created during the planning phase (budgets distributed over time) and the actual costs incurred.
As tools, we often use the planned man-hours performance table and EVT(Earned Value Technique). There are five points to be aware of.
- take proactive measures in advance in anticipation of cases of budget overruns
- manage signs of over budget
- detect over budgets as soon as possible
- have a lot of countermeasures
- to be able to make fixed-point observations and present as grounds for scope adjustment with the user to determine how much room there is in advance
- it is also good to grasp it by management forms such as budget execution sheets. it is also important to be able to receive reports directly or in progress meetings.
SUMMARY
As with meeting deadlines as a PM, it is important to adjust costs within the budget, but the reason why cases of mass production of deficit projects are created because it is not done in the process that should be done in the first place.
The process that should be determined by the balance of the QCD. In other words, as a PM, as a person who can look over the entire project and details, it is possible to grasp the situation at any time by tracking progress while looking at the balance of the QCD, and to be able to manage costs by quickly noticing signs that it is likely to exceed the budget.
Customers basically only want the "best QCD".
But such things are illusions.
Pm's skills are required to realize customer requests with limited resources. The PM must be the "producer" who will make the customer's dream come true, but also the ultimate "realist".
To that end, remember that by constantly grasping the balance of QCD and creating a state where you can make recommendations to customers, you will prevent "being at all" and lead to control of the entire project.
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