Project Management

Chapter 17 : Project Cost Management

Process of Cost Management

Resource Planning

Cost Estimating

Analogous Estimating
Bottom-Up Estimating
Parametric Modeling
Computerized Tools

Cost Budgeting

Cost Control

Cost Change Control System
Performance Measurement

Cost Overruns and their Implications

Factors that Cause Cost Overruns

Chapter Summary

Costs do not occur, they are incurred. Failure to control costs has led to the failure of several projects. The process of cost management is done in four steps: resource planning cost estimating, cost budgeting and cost control. Resource planning identifies all the resources that the project requires.

The project manager consider various alternatives and seeks the opinions of experts to plan for these resources. To estimate the costs, the project manager uses techniques like analogous estimating, parametric modeling, bottom-up estimating and certain computerized tools. The cost change control system describes the procedures in controlling the costs.

Projects generally incur more costs than planned. These extra costs are called cost overruns. Cost overruns occur because of cost escalations, time overruns, scope changes, budget underestimation/ omission, rectifications and replacements and unforeseen contingencies.

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