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IntroductionThe Cost Management Plan clearly describes specifically the methodology for monitoring and control of project costs during the project lifecycle. It includes the system and baseline for measurement of the project costs, their reporting, and controlling mechanism. It also includes the following:. Identification of the authority for cost management. Nomination of the authority for approval of changes in costs. Procedure for quantitative measurement of cost performance, and its reporting. Formats for reports, their frequency, and to whom deliveredThe Project Manager has been assigned the responsibility for the management and control of the project cost during the project life cycle.

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1. Cost Management Plan Example Pdf 2017

During the project fortnightly status meeting, the Project Manager will explain the project cost performance, with measures adopted for its control. Earned value management will be used for measuring cost performance. The Project Manager is accountable for all cost variance, and recommending alternatives for completing the project back on planned budget. The Project Sponsor will use discretionary measures for authorizing cost changes to exceed budget, if necessary. Cost Management ApproachApproach to be maintained for the management of cost is documented in this part of the Cost Management Plan. Cost Accounts will be created at the third level of the Work Breakdown Structure. If a suitable Project Management Information System is being used, then it is recommended that the costs should be managed till the level of work package.

Cost Management Plan Example Pdf 2017

Asset Management Plan x Policy and Institutional Recommendations Asset Management Objective CDOT Unit Responsible Task Timing and Cost A. Designate a departmental task force under the Deputy Director to guide implementation of the asset management plan. Designate the task force, building upon the experience of the Project Panel for Asset. The Develop Project management Plan in Integration Management involves the creation of the cost management plan. “Cost” and “Budget”, these two words are used interchangeably in the exam. It is important to note that the step of creating the cost management plan exists irrespective of where it is created.

If a detailed Project Management Information System is not available, then the level of cost control in the Work Breakdown Structure should be such till the cost can be efficiently reported and managed. The lower the cost is managed in the Work Breakdown Structure, the greater will be the effort required.

Thus, the level should be balanced with the effort that can be utilized for this purpose.Project costs will be controlled at the third level of the WBS, by creation of Control Accounts at this level for the cost tracking. Project financial cost performance will be measured and controlled by using the methodology of Earned Value Management, to be applied for the Control Accounts. Although cost estimates of the activities will be detailed in work packages of the Work Breakdown Structure, the accuracy level will be determined at the third level of the WBS. Work will be monitored at the level of Work Package. 50% credit to work will be granted on its initiation, while remaining 50% will be assigned on its completion.

Work hours will be determined to the level of hours, while the level of accuracy for the costs will be nearest dollar.Variance of +/- 0.2 in the Schedule Performance Index ( SPI ) and Cost Performance Index ( CPI ) will indicate a caution to the Project Manager, and will be reflected in the status reports of the project. If these variances exceed +/- 0.3, an alert stage will be created, where appropriate remedial measures will be necessary by the Project Manager, to ensure reduction of the variances below the alert level. Corrective actions to be undertaken will be recommended to the Project Sponsor, by the initiation of a Change Request. Project Costs MeasurementThis part of the Cost Management Plan describes the procedure for measuring the project cost. Earned Value Management is a useful tool that is used globally for the measurement and control of the costs in a project. It is recommended that Project Managers should be conversant in this methodology by undertaking formal training in this discipline.Detailed procedure should be mentioned in this section, including the measurements that will be captured and analyzed. If any software is to be used, like Primavera P6, then it should be mentioned, including its installing and training to the users of this application.

This section will also describe if the cost performance will be reviewed with reference to work packages, time, or schedule of activities. In this section of the Cost Management Plan, four measurements have been specified, namely Cost Variance (CV), Cost Performance Index ( CPI ), Schedule Variance (SV), and Schedule Performance Index ( SPI ). These measurements will provide adequate status of the project cost performance for efficient control and management.Cost Variance (CV): It is a measurement that determines the project budget performance, and can be measured at any stage of the project.

CV is the difference of Earned Value (EV) and the Actual Costs (AC). EV represents the budgeted cost of an activity, and is the real value achieved for the project. AC is the amount actually spent for the completion of that activity. CV will indicate if the cost performance is below, equal, or above the planned budget at any stage of the project.If value of CV is zero, then it implies that the project coast performance is the same as was planned, and project is on budget. If value of CV is greater than zero, then it is a good indicator, representing that more is being earned by the project than was planned, and the project is under budget. If CV is less than zero, then cost performance is not good, and needs to be analyzed for remedial action. The project in this situation is earning less than what was planned, and the project is over budget.Cost Performance Index ( CPI ): It measures the value of the completed work, comparing the actual cost incurred for the completion of that work.

CPI is determined by dividing EV by AC, EV/AC. If the value of CPI is 1, then the project is precisely on budget.

If the value of CPI is greater than 1, then it is a good indicator for the project cost performance, and the project is under budget. If CV is less than 1, then the project is being completed over budget, and corrective actions are necessary.Schedule Variance (SV): It is a measurement that indicates the project schedule performance. It is calculated by subtracting the Planned Value (PV) from the Earned Value (EV), and formula is SV = EV – PV. Since EV is the real value earned at any stage of the project, and PV is the value that was planned at that stage, then SV will indicate the variance, whether the project is behind or ahead of the schedule baseline, or on schedule. If SV is greater than zero, then the project performance is good, and it is earning more value than that was planned, and project is ahead of schedule.

If value of SV is less than zero, then the project schedule performance is not satisfactory, and needs to be analyzed for necessary remedial actions.Schedule Performance Index ( SPI ): It signifies the project progress attained till any stage, against the value that was planned. SPI is the ratio of EV and PV, and calculated as EV/PV. If EV is same as PV, then SPI will be 1, implying that the project schedule status is exactly the same as that was planned. If the value of SPI is greater than 1, then the project schedule performance is good, and the project is ahead of schedule. A good planned and controlled project should have the value of SPI close to 1, and value less than 1 indicates that the schedule performance needs to be reviewed.Project performance will be measured by the use of Earned Value Management.