Cost Management Plan | How to Create?

What is the cost management plan?

In general, a cost management plan establishes how related business processes will work, what to call the main unit of cost, how measurements will be performed, and any features of how performance will be evaluated.

How to Create?

To create a cost management plan, the project manager must first consider all relevant factors. This requires being systematic. In other words, we can say that you need a plan to create a cost management plan. You can start by determining the cost targets of the project. Having a goal is the first step. In this context, you must first determine what the project's budget is using the determine budget process. Issues such as which financial resources are available and which costs will be included are given within the scope of the project.

Another important issue is the cost constraints. This financial or budgetary constraints that may affect the budget of the project should be well known and managed by the project manager. For example the project may have a fixed budget or there may be limitations on the amount of money that can be spent on certain activities. After these constraints are determined, it should be analyzed which constraints have priority and how these priorities have an impact on the management of constraints.

Cost estimation techniques and budget tracking tools are used in the stage of creating a cost management plan. Cost control measures such as risk management strategies are determined.

Plan Cost Management Process

Plan cost process is a project management process in which a cost management plan is prepared to guide how, where, with what resources, and using what criteria the other three processes in the cost management knowledge area will be implemented.

In general, in this process, we will reveal a document that will describe how to manage the project cost, how to estimate the cost, how to determine the budget, and how to monitor and control the cost, how to use measurement methods of the costs realized and provide some kind of guidance to the project team.
Plan cost management process is a part of the planning process group and cost management knowledge area. It is conducted once or at predefined points in the project management life cycle.

It is considered a project artifact that is likely to be used in the planning performance domain.

Inputs to the plan cost management process

  • Project charter: Since the summary budget contained in the project launch document will be included in the cost management plan, the launch document is used as input.
  • Schedule management plan: It involves everything related to the schedule that can affect the cost of the project.
  • Risk management plan: Project risks, as well as contingency and management reserves, are directly related with cost aspect of the project.
  • Enterprise environmental factors: EEF's like organizational culture, market conditions, currency exchange rates, any commercial information, PMIS are useful factors to use as an input.
  • Organizational process assets: Financial procedures used by the organization, historical data about cost management, lessons learned repository, financial databases, and sectoral guidelines about cost estimation and cost management are good examples of OPA in this process.

Tools and Techniques of plan cost management

  • Alternatives Analysis: When the subject is cost management, there are many points to make decisions and therefore evaluate alternatives. 
  • Meetings: Helps to get opinions and engagement of stakeholders and keeps the project integrated along with the efforts of the project manager.
  • Expert judgment: This is a very basic but useful tool to use as it reflects the opinions of people who have knowledge about the subject. Expert judgment can be gained from a large variety of professionals including independent consultants, cost accountants, representatives from the accounts
  • department, PMO members, former project managers, team members of different projects, etc.

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