Cost management is an important part of project management that involves estimating costs, creating budgets, and controlling costs so the project is completed within budget. It is analogous to time management since resources' time is the main cost. Every project has constraints of scope, time, and cost, known as the triple constraint. Cost management processes include cost estimating, cost budgeting, tracking costs against the baseline, and handling any cost overruns. Questions from participants are addressed at the end.

1. Project Management Cost Management MOHAMMAD K. KIWAN PMO MANAGER IMAGE TECHNOLOGIES Part of Project Management Awareness Sessions

2. Cost Management It is from Project Management perspective and NOT personal development/management perspective. Cost Management is very analogous to Time Management (because resources’ times are the main cost of the project) August 10, 2009 2

3. The triple constraint Every project is constrained in different ways by its: Scope: What work will be done as part of the project? What unique product, service, or result does the customer or sponsor expect from the project? Time: How long should it take to complete the project? What is the project’s schedule? Cost: What should it cost to complete the project? What is the project’s budget? August 10, 2009 3

4. The triple constraint triangle August 10, 2009 4 Scope Time Quality Cost

5. Project Cost Management Project cost management includes the processes required to ensure that a project team completes a project within an approved budget. Cost Management involves Cost Estimating & Cost Budgeting August 10, 2009 5

6. Cost Estimate vs. Cost Budget Cost Estimate: the estimation of all activities and tasks’ costs (mostly resource costs). The techniques are similar to time estimating. Cost budgeting is allocating project cost over time (time-phased budget) August 10, 2009 6

7. Cost Estimation You need to know scope first (including project scope) You should estimate cost for ALL of your work (Planning, PM Activities, meetings, Design, Developments, Quality work, Risk work, Approval, Documentation, Training, Lessons Learned, Traveling, …) August 10, 2009 7

8. Cost Baseline vs. Cost Budget Cost Estimation+ Contingency Reserve = Cost Baseline Cost Baseline + Management Reserve = Cost Budget You should track against cost baseline not cost budget August 10, 2009 8

9. Cost Terms (similar to time) Estimates: Bottom up, top down (analogous), parametric. Also: one point, three point (PERT), estimate with range. Also: ROM, budgetary, Definite. EVM = Earned Value Management EV PV AC August 10, 2009 9

10. Cost Control Cost should be controlled Cost should be baselined Cost overruns should be handled (management approval, cost optimization) Cost/Time/Scope tradeoffs are handled by the PM and/or PS. August 10, 2009 10

11. Questions? August 10, 2009 11

12. Thank You August 10, 2009 12