created by Ms. Deepika - Engineer Business Support, PPM

1. 1
COST MANAGEMENT

2. What is Cost Management? 2
• Process of planning and controlling the budget of
the project.
• Cost management predicts the expenditure and
reduce the project from going over budget.

3. Principles 3
• 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

4. Principles 4
• Direct cost (Directly related to project)
 Salary
 Purchase of software
• Indirect cost (Not directly related to project)
 Electricity bill
 Telephone bill

5. Why is it important? 5
• 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

6. What does it include? 6
• Budget
• Benefit
• Spending
• Expenses
• Funding
• ROI

7. How is it done in project? 7
• Cost Management Plan
• Cost Baseline
• Activity Cost estimates
• Performance Measurements

8. Cost in Project Management 8
Estimate Cost
Determine Budget
Control Cost

9. Estimating Cost 9
• Projected cost of a project.
• Analogous Estimating
• Parametric Estimating
• Bottom-up Estimating
• Three-point Estimates
• Cost of quality

10. Determine Budget 10
• Cost Aggregation
• Reserve Analysis
• Historical Data
• Funding Limit Reconciliation

11. Control Cost 11
• Earned Value
Management
• Forecasting
• To-Complete Performance
Index (TCPI)
• Variance Analysis
• Performance Reviews

12. Earned Value Analysis 12
• 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

13. Rate of Performance 13
• 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.

14. Cost Budgeting 14
• 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

15. What are the benefits? 15
• Meeting budget goals.
• Realistic project estimates.
• Earned value Management
• Cost accounts
• Rate of performance

16. What are the benefits? 16
• Project is completed within an approved
budget.
• Accurate cost estimates and realistic budget.
• Return on investment (ROI)

17. How does Primavera help? 17
• Budgeting
• Labor cost
• Earned Value Report
• Cost Variance
• Total Project Costing

18. How does Primavera help? 18
• Cost Account
• Project Expenses
• Manage Currency
• Budget Summary
• Funding Details

19. How Does MSP help? 19
• Earned Value management
• Planned and Actual value
• Manage currency
• Project expenses

20. Pearl river tower 20

21. 21
Thank You