The lack of uniformity between the planned costs and the expenses incurred during a project’s course is indicative of risks. Here, lies the need for cost control in project management. ‘Control costs’ is one of the vital project management processes. The success is achieved in this process determines the overall success of a project.
What Does The ‘Control Costs’ Process Involve?
Control Costs Process refers to the supervision of project from time to time to update the costs being incurred. The project manager and his team members stay updated with newly emerging project costs if any. Accordingly, they make changes to abide by the initially planned and estimated cost baseline.
Inputs Of Control Costs Process
Here is a brief discussion on what it takes to conduct the control costs process successfully.
Project management plan
This plan comprises two sections, namely, the cost management plan, and the cost baseline.
The latter serves as a tool for comparing actual costs to planned expenditures.
A cost management plan reports only the expenditure variances that are worth considering. An increase in expenditure on a particular raw material by 20% is acceptable if the project’s budget remains unaffected altogether. This plan comprises instructions for the rest of the processes within the ‘cost management’ knowledge area.
Besides, it specifies the rules regarding EVM deployment in a project. EVM is a performance measurement tool that also identifies the time to be taken by the project till its completion. Also, the cost control threshold is included in the plan to take necessary actions if the threshold is crossed. Formats of work reports sent to and received by stakeholders need a mention in the cost management plan.
It is a detailed description of the activities started, and completed, along with information on incurred and authorized expenses.
Project funding needs
A plan of the periodic funds needed for reserves and expenditures is another crucial input of the control costs process.
OPAs (Organizational Process Assets)
These refer to the templates, procedures, and organizational policies required for reporting and managing project costs.
Tools And Techniques Of Control Costs Process
Multiple techniques and tools are used in the control costs process, which is as follows:
- Analysis of earned value is the technique used to identify if the actual costs match the expenses of the same activities as planned in the budget.
- Variance analysis is the next step to detect the cause of this variance if any.
- Forecasting including TCPI is used to determine the project’s upcoming expenses with respect to its budget or schedule.
- Trend analysis is conducted to view the latest trends not covered during earned value analysis.
- Financial analysis involves checking if sufficient project funds are remaining to cater to the project’s requirements.
- PMIS (Project Management Information System) is no technique but a tool for assistance in forecasting and trend analysis. It is mainly used for controlling the earned value analysis’s 3 essential components. These are namely, actual cost, planned value, and earned value.
Outputs Of Control Costs Process
The results obtained from the control costs process have been discussed here.
- Work performance information emerges as a result of the work performance data applied in the process. This output points out the differences in the expenses incurred and the planned costs. It is utilized for requesting changes to rectify them.
- EAC (Estimate At Completion) is the product of forecasting and trend analysis. It presents the estimate of expenses involved in project completion. Documentation of EAC is included within reports sent to stakeholders.
- Change requests emerge due to the identified cost variances which, in turn, serve as inputs to the process of change control. These are requests made to bring about changes in a process so that the expenses do not exceed the planned costs.
- The cost management plan also gets updated with stakeholders’ feedback which may result in the change request. This is a request for moderating process guidelines and cost control thresholds at the time of issuing the project cost report.
- Change requests are of two kinds- corrective measures and changed plans. Both cost baseline and performance measurement are control costs process outputs that are influenced by change requests.
- Even the components of earned value analysis change to appear as outputs of the control costs process.
Input, outputs, and techniques of this process are interconnected and function within a cycle. This cycle is prevalent until a project is fully accomplished. Measurements and techniques might be different but they all produce the same result with respect to different aspects. The control costs process is the last but most vital of the cost management section of project management. Change request plays a crucial role in appropriate decision-making as to what changes to be implemented for balancing the project’s budget and schedule. Moreover, continuous assessment of incurred expenses in relation to the planned expenditure is the only area of concentration.