Cost Management Plan

917 Words Dec 18th, 2013 4 Pages
Cost Management Plan

The risk management tool that I would like to discuss is the cost management plan. The definition according to PMBOK is “a document that sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project costs”. The cost management plan is often packaged inside of a larger project management plan which will demonstrate how to effectively control and execute the overall strategy. The cost management plan may be formal or informal, extremely detailed or loosely framed depending on what the project needs. An effective cost management plan can establish the following: 1. Level of accuracy- Activity cost estimates need to be consistent and uniform based on the
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7. Process descriptions- The three cost management processes are listed.
There is a sequence in which this all comes together nicely and can involve multiple teams within the project or a single person with authority on a smaller project. The ability to influence cost and determine risk associated with it is greatest at the beginning stages of a project life cycle. In order to develop a proper cost management plan, the project management team must creatively gather facts and brainstorm. There are three main processes used during project cost management that can be utilized and defined in the cost management plan. These processes are estimating costs, determining the budget, and controlling costs. This project-specific approach to cost management may generate or reduce risk by its design alone.
Inadequate funding is a major factor in almost all projects and could cause lengthy setbacks or recalculations to scope. Project cost estimates will include any or all of the following; staffing, outsourcing, equipment, services, travel, communication, or financing. The overall project budget will be developed after considering these factors and then after a complete picture is given, it may be determined that the more money is required for completion. Another benefit to accuracy on a cost management plan is the ability to study the outcome after the project. Trends, unknown risks, and inconsistencies become apparent for future projects and should be kept on file