Staying on top of your project expenses is really important if you want to bring the project in on budget. However, how you actually do that changes as you go through the project. You’ll want to take a different approach to cost control depending on where you are in the project and how you need to respond to the project budget situation.
The graphic below shows four tools for cost control at each point in the project lifecycle. You can pick and choose from these to select a way to manage expenses on your project, wherever you are in the lifecycle.
For more on this idea, check out this article.
There’s a lot of jargon in project cost management, and your cost management plan is full of terminology you might not have come across before.
There’s nothing difficult about the vocab, and it’s not trying to catch you out. However, if you are finding there are sections of your cost management plan that you don’t know how to complete, it could be because the jargon is new to you.
This infographic sets out 7 of the common cost management terms that you’ll come across when preparing a cost management plan, and explains them in simple language!
In this quick video I introduce three alternatives to prototyping. Prototypes on projects can be almost a mini-project by themselves. They are time consuming and can be expensive. There are alternatives if you are prepared to consider them.
If you’d like more information on the options in this video, or to find out more about pretotyping (which I decided not to include in the video but is another valid alternative) then check out this article: Alternatives to Prototyping.
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What should you include in the cost management plan for your project? If you have a template from your PMO, then it’s best to start there. But if you are designing something from scratch, here are some helpful pointers for the different sections that you should be considering.
Here’s a handy print-out-and-keep guide to what you should be including in project cost management plans. For more details on what each item relates to, check out this article.
What do you think – do you like this kind of graphic? Is it useful or would you prefer more text-based descriptive articles? I’m curious to know what works best for you, so I can make sure I’m writing and creating things that best serve you, so drop a comment below! Thank you!
Over the last few articles, I’ve looked at how the Project Cost Management Knowledge Area has been revised in the new PMBOK Guide®-- Sixth Edition. Broadly, it’s been spruced up and clarified, and you’ll need to know the updates if your sitting the exam. As for changing what you do day to day at work – not so much.
If you’ve got your copy of the PMBOK Guide®-- Sixth Edition, you’ll have noticed one major difference in this version. There’s space in each Knowledge Area chapter for a discussion of trends in that area, how you can best tailor the processes to fit your organisation and an overview of what it means to use these processes in an agile or adaptive environment.
I think it’s useful to have this guidance, although it’s only a glancing paragraph or two in each case. Even so, I think it gives people – especially project managers who are perhaps in restrictive or bureaucratic environments, or those who are new to managing projects – permission to do things in the most sensible way, instead of in the way that the book says.
So what does the guidance say about Project Cost Management?
Trends in Cost Management
The big trend covered in the Cost Management section is that of Earned Schedule. There’s a move, apparently, to replacing schedule variance metrics with earned schedule (ES). The difference is in the way schedule variance is calculated:
Schedule Variance = Earned Value - Planned Value
Schedule Variance = Earned Schedule - Actual Time
The aim is to make it easier to get schedule data from the earned value calculations to give you information about time and duration, and to make it easier to forecast accurately.
This idea has been around for a while (there’s an interesting conference paper on it here from 2011 which explains it better than I can).
I’m in two minds about whether the inclusion of earned schedule is useful or not.
On the one hand, it’s a concept that is hardly new to project professionals. If you know much about EV then you have probably come across this idea before. However, I am guessing here. I don’t move in circles where we talk about earned value much, so perhaps the idea hasn’t gained as much ground as I think it should have. (I’d be interested in your take on this – have you come across ES before?)
On the other hand, I’m not aware of any other major trends in handling project finances either, and I get that they had to include something! Frankly, anything that extends the use of earned value to include other measures that project managers can usefully use to deduce information about their project’s performance has to be good. If this brings the concept more to the masses, and helps project sponsors see an extended value from EV, then that’s positive.
Tailoring Cost Management
The guidance given on tailoring Project Cost Management is really quite high level.
As you’d expect, as every project is different you do have to apply a degree of professional judgment to the situation. Things to consider, that are called out in the guidance, include:
There are also some general comments about considering whether you work in an agile/adaptive environment, checking out the lessons learned and knowledge repositories for financial information and so on.
I think the things discussed in these sections of the Knowledge Area underpin my comments on the rest of the chapter: Project Cost Management has been tweaked rather than radically overhauled. I imagine if you did this line-by-line analysis of the other Knowledge Areas you would conclude the same thing. PMBOK Guide®-- Sixth Edition is an evolution, not a rethink. It’s handy to have the latest guidance, and to read it through for information to stay up to date, but I haven’t found anything in this Knowledge Area that would make me change how I approached Project Cost Management on a day-to-day basis.