Cost management is the process of planning and controlling a project's budget to help ensure the project is completed within budget. It involves estimating costs, setting a budget baseline, tracking actual costs against estimates, and implementing controls to address any variances. Key aspects of cost management include cash flow analysis, distinguishing direct and indirect costs, earned value analysis to measure performance, and using tools like cost management plans, cost accounting, and earned value reports in Primavera and Microsoft Project to help manage costs over the life of a project. The overall benefits are keeping the project within its approved budget, having accurate cost forecasts, and maximizing return on investment.

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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

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Thank You