Plan Cost Management Process

Cost management is an important knowledge area of PMP exam. In order to manage costs, as it is the case for all other knowledge areas you need to plan it carefully. In the planning process of cost management, the output of the cost management plan is obtained, which determines the procedures, methods, exchange rates to be used, and tolerance values for managing and controlling costs.

Project cost management is the process by which policies and procedures are determined on how to manage costs throughout the project. It is done as a part of planning process group and it is also a part of cost management knowledge area.

The main output of the process is cost management plan. By creating a cost management plan, we have a document that describes the policies and actions necessary to predict, plan, configure and control project costs.The cost management plan, like management plans in all other knowledge areas, forms a sub-part of the project management plan.

Inputs of Plan Cost Management Process

  • Project charter: From this document, we will access approved financial resources where we can create details of the cost of the project. In addition, project requirements that can affect cost management are included, so the project initiation document is included as input in the process.
  • Risk management plan: To plan costs we need to know the main methodology to deal with risks. Risk categories and methods to create contingency and management reserves. Because every risk response will bring a cost to the project and they should be planned.
  • Schedule management plan: Since the project budget will be developed on the basis of time intervals, we also need a schedule management plan. 
  • Enterprise environmental factors: Organizational culture and structure will be a useful input for your project. EEF's related with finance such as currency rates, market conditions are also useful. Additionally, project management information systems is input here below the topic of EEF.
  • Organizational process assets: Lessons learnt repository from the previous projects, templates of the organization, internal financial database or your organization and cost estimating and budgeting policies, procedures of the organization are good examples of OPA used as input in this process.

Tools & Techniques recommended for the Process

  • Meetings : You will be obliged to organize several meetings in order to communicate with the stakeholders and the project team while creating the cost management plan.
  • Expert judgment: External experts, financial experts inside or outside of your organization, people who have experience about creating a cost management plan will be helpful for the process.
  • Alternatives analysis: Several decisions will be taken to create the plan. Therefore you need to evaluate the alternatives by using alternative analysis tool.
1- John 03.06.2021
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