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7 - PROJECT COST MANAGEMENT

Project Cost Management should consider the stakeholder requirements for managing costs. Different
stakeholders will measure project costs in different ways and at different times. For example, the cost of an
acquired item may be measured when the acquisition decision is made or committed, the order is placed, the item
is delivered, or the actual cost is incurred or recorded for project accounting purposes.

Project Cost Management is primarily concerned with the cost of the resources needed to complete project
activities. Project Cost Management should also consider the effect of project decisions on the subsequent recurring
cost of using, maintaining, and supporting the product, service, or result of the project. For example, limiting the
number of design reviews can reduce the cost of the project but could increase the resulting product’s operating
costs.

In many organizations, predicting and analyzing the prospective financial performance of the project’s product is 7
performed outside of the project. In others, such as a capital facilities project, Project Cost Management can include
this work. When such predictions and analyses are included, Project Cost Management may address additional
processes and numerous general financial management techniques such as return on investment, discounted cash
flow, and investment payback analysis.
The cost management planning effort occurs early in project planning and sets the framework for each of the
cost management processes so that performance of the processes will be efficient and coordinated.

7.1 Plan cost Management

Plan Cost Management is the process that establishes the policies, procedures, and documentation for planning,
managing, expending, and controlling project costs. The key benefit of this process is that it provides guidance and
direction on how the project costs will be managed throughout the project. The inputs, tools and techniques, and
outputs of this process are depicted in Figure 7-2. Figure 7-3 depicts the data flow diagram of the process.

Inputs Tools & Techniques Outputs

.1 Project management plan .1 Expert judgment .1 Cost management plan
.2 Project charter .2 Analytical techniques
.3 Enterprise environmental .3 Meetings
factors
.4 Organizational process
assets

Figure 7-2. Plan cost Management: Inputs, tools & techniques, and outputs

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©2013 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition 195

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