Poor cost management often leads to project failure. Project costs can increase due to various reasons, including unfeasible cost estimates, bad weather conditions, supply chain challenges, and scope change which can result in a variety of challenging situations. They have an impact not just on the project’s performance, but also on future projects. Therefore, project managers should understand the Plan Cost Management Process in order to regulate, monitor, and manage the project’s budget.
What Is Plan Cost Management Process?
Plan Cost Management Process in project management is a process that establishes the policies, and procedures for planning, managing, and controlling costs for the various resources to complete all project-related tasks. This process outlines an estimate of the number of resources required and provides the best strategy to manage project expenses throughout the project’s lifespan. Furthermore, it assists project managers in completing the project within the allocated budget.
Inputs In Plan Cost Management Process
The following are the inputs of the Plan Cost Management Process in project management.
Project management plan
A project management plan is a formal, approved document that details how a project will be executed, monitored, and managed. It defines the technique that the project team utilizes to deliver the project’s intended project management scope. An effective project management plan includes baselines, subsidiary management plans, and other planning documents. Furthermore, it establishes the foundation of all project activities and acts as a reference tool for making project decisions.
A project charter is a formal document that describes the project’s objectives, scope, stakeholders, and participants. It provides guidance throughout the project’s lifespan and also gives permission to commence the project.
Enterprise environmental factors
Enterprise environmental factors are internal and external influences that have both positive and negative impacts on managing the project.
Some examples of external enterprise environmental factors:
- Government regulations
- Industry standards
- Legal restrictions
- Commercial databases
- Academic research
- Finance and market conditions
- External political conditions
Some examples of internal enterprise environmental factors:
- Distribution of facilities and resources
- Employee capability
- Organizational culture
- Organizational structure
- Internal political condition
Organizational Process Assets
Organizational Process Assets would include anything acquired by the organization for managing projects. These are critical for the planning stage and assist in accomplishing project objectives.
It comprises organizational standard procedures, standardized guidelines, templates, knowledge bases for configuration management, finance databases, process measurement databases, historical information, lessons learned, and previous project files.
Tools And Techniques Involved In Plan Cost Management Process
The following are the tools and techniques involved in Plan Cost Management Process.
Expert Judgement is a technique in which judgment is provided based on a specific set of criteria and/or competence gained in specific knowledge. It involves senior management, key stakeholders, project managers, and subject matter experts.
Analytical techniques are methods for analyzing issues, facts, or status to properly estimate prospective outcomes while taking project factors into account. There are various analytical techniques used in project management, some of them are simple profiling, cross-tabulation, and regression analysis.
Meetings are held to discuss the project approach, determine how the project work will be carried out to accomplish the project objectives, and develop a plan for project monitoring and control. It is usually conducted by project managers.
Outputs Of Plan Cost Management Process
The output of the Plan Cost Management Process is as follows
Cost management plan
A cost management plan is a strategy for managing and controlling the budget for a project. It describes the project’s cost estimation, allocation, and control for the resources needed to fulfill all project tasks. Furthermore, it examines project costs for planning, funding, and managing, and acts as a safety net to keep project costs within budget constraints.
Plan cost management is the first step in project cost management, detailing how the project’s expenses will be estimated, budgeted, managed, monitored, and controlled. It assists project managers in completing projects within the allocated budget. Therefore, project managers should have a thorough knowledge of the Plan Cost Management knowledge area.
PMI has released the seventh edition of the PMBOK Guide, that emphasizes performance over processes and outcomes over deliverables. The sixth version of the PMBOK Guide initially focused on technical processes, inputs, tools, techniques, and outputs. However, the seventh version of the PMBOK emphasizes team skills and resources in order to deliver value-based results. This significant shift does not indicate that process-based techniques are obsolete or ineffective. It is still frequently used by businesses and project management practitioners. As a result, candidates can prepare for the PMP Exam using both PMBOK 6 and 7.