What’s New in Project Cost Management (pt 1)

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What’s New in Project Cost Management (pt 1)


Categories: cost management


Have you got your copy of the PMBOK Guide®-- Sixth Edition yet? It’s not a scintillating read, but it is worth a look, especially (and of course) if you are planning on going for a PMI certification this year. For the purposes of this article, and in line with what this blog normally looks at, today I’m going to highlight the changes in the Cost Management knowledge area.

For this I have to thank the authors of a free pdf including Asad Naveed, Varun Anand and others, as they put together a comprehensive guide to what is new in the latest version. I’ve also been pouring over the electronic version but it has definitely helped to have someone else call out where I should be looking.

So, without further ado, let’s dive into how project cost management is different now.

Plan Cost Management Process

The first process in this knowledge area is Plan Cost Management, and you won’t find much that has changed.

We are, of course, in the planning process group.

Inputs

The inputs have stayed the same, but interestingly have changed order. The Project Charter is now at the top of the list which I think makes sense. It’s produced before the project plan, so it’s more logical to have it first although in reality it won’t make any difference to how you actually do the project.

Tools and Techniques

I always thought ‘analytical techniques’ was vague, and in the Sixth Edition this has been replaced with Data Analysis.

That’s still a vague description of a technique you might use to work out and work with the costs on your project. Specifically, the text refers to using alternatives analysis, which is a lot less complicated than it sounds. I interpret this as using basic techniques you would expect to see in a business case to discuss the different alternatives for funding the project, with the objective of concluding which is going to be the best route for this piece of work.

Alternatives include:

  • Funding your project from capital
  • Funding with a loan i.e. debt
  • Making the project self-funding
  • Or some other way or raising the money to do the work.

You can also do the same ‘how shall we get the money?’ discussion for specific resources, and this is a make or buy decision. You can also consider whether to rent equipment, for example, or any other way of getting what you need.

There, that’s not so complicated, is it? And a lot more useful than the vague ‘analytical techniques’ of the previous version.

Outputs

Move along, nothing to see here!

Outputs remain the same: there’s just one and it’s the cost management plan.

Next time I’ll look at what’s new in the Estimate Costs process. A quick spoiler: I think it’s got easier and the process is more streamlined! You’ll have to let me know what you think.

Posted on: January 15, 2018 07:59 AM | Permalink

Comments (15)

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Thanks for sharing, Elizabeth!

For me, the following changes were the most memorable in this knowledge area:

* Dropped the use of the term PERT for Beta distributions
* Financing added as a new tool for Determine Budget process 
* EVM has been broken out into EVA and Variance Analysis and lumped under Data Analysis as a tool for Control Costs
* PMIS added as a tool for Control Costs

Kiron

Thank you Elizabeth and Kiron for comparing and elaborating the updates in latest edition.
Looking forward for the remaining parts.

Great article and informative, thanks for sharing.

Good Comparison Elizabeth, thanks for sharing.

@Kiron: Thanks for the additional info. I recall you shared once a video for the 6th Edition. Where can we find it ? Can you send me the link on the inbox ? Thanks a lot.

Thanks for sharing :)

Thank you for the valued information!

Thank you for the valued information!

Thanks Elizabeth, It is nice to have quick guide for the differences between 5th and 6th Ed.
I look forward for the next post :)

Thank you! Great overview!

Interesting!

Great great stuff! Thank you!

Nice overview. Thanks for sharing.

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