cost management plan[1]

7/27/2019 Cost Management Plan[1]

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PROJECTCOSTMANAGEMENTPLANTEMPLATE

This Project Cost Management Template is free for you to copy and use on your projectand within your organization. We hope that you find this template useful and

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COSTMANAGEMENTPLAN

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Cost Management Plan Template

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INTROD'CTIONThe Cost Management Plan clearly defines how the costs on a project will be managedthroughout the project3s lifecycle. t sets the format and standards by which the project costs are

measured4 reported and controlled. The Cost Management Plan: dentifies who is responsible for managing costs

dentifies who has the authority to appro5e changes to the project or its budget

*ow cost performance is 6uantitati5ely measured and reported upon

"eport formats4 fre6uency and to whom they are presented

The Project Manager will be responsible for managing and reporting on the project3s costthroughout the duration of the project. During the monthly project status meeting4 the ProjectManager will meet with management to present and re5iew the project3s cost performance for thepreceding month. Performance will be measured using earned 5alue. The Project Manager isresponsible for accounting for cost de5iations and presenting the Project &ponsor with options

for getting the project bac7 on budget. The Project &ponsor has the authority to ma7e changes tothe project to bring it bac7 within budget.

COSTMANAGEMENTAPPROAC(This section you e8plain your approach to cost management for your project.

We chose to create Cost 'ccounts at the fourth le5el of the W1& as an e8ample since manyproject management offices don3t ha5e a Project Management nformation &ystem. f you areusing a Project Management nformation &ystem then you can4 and should4 manage costs downto the wor7 pac7age le5el. -or those who don3t ha5e a Project Management nformation &ystem

you3ll want to determine which le5el of the W1& you can most effecti5ely manage the project3scosts from. The further down in the W1& you go4 the more detailed your cost management is.*owe5er4 you should balance the granularity at which you want to manage costs against theamount of effort it ta7es to manage at that le5el. The more granular your cost management4 themore wor7 is necessary to manage it.

Costs for this project will be managed at the fourth le5el of the Wor7 1rea7down &tructure9W1&. Control 'ccounts 9C' will be created at this le5el to trac7 costs. )arned /aluecalculations for the C'3s will measure and manage the financial performance of the project.'lthough acti5ity cost estimates are detailed in the wor7 pac7ages4 the le5el of accuracy for costmanagement is at the fourth le5el of the W1&. Credit for wor7 will be assigned at the wor7

pac7age le5el. Wor7 started on wor7 pac7ages will grant that wor7 pac7age with ;< credit=whereas4 the remaining ;< is credited upon completion of all wor7 defined in that wor7pac7age. Costs may be rounded to the nearest dollar and wor7 hours rounded to the nearestwhole hour.

Cost 5ariances of >?@ ;.2 in the cost and schedule performance inde8es will change the status ofthe cost to cautionary= as such4 those 5alues will be changed to yellow in the project statusreports. Cost 5ariances of >?@ ;.% in the cost and schedule performance inde8es will change the

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status of the cost to an alert stage= as such4 those 5alues will be changed to red in the projectstatus reports. This will re6uire correcti5e action from the Project Manager in order to bring thecost and?or schedule performance inde8es below the alert le5el. Correcti5e actions will re6uire aproject change re6uest and be must appro5ed by the Project &ponsor before it can become withinthe scope of the project.

MEAS'RINGPROJECTCOSTSThis section defines how the project3s costs will be measured. The PM1#A focuses on )arned/alue Management for measuring and controlling a project3s costs. )arned /alue Managementis a broad and powerful tool= as such4 we recommend that all project managers ta7e some formalcourses in )arned /alue Management.

n this section you should detail how you will measure the project costs. What )arned /aluemeasurements will be captured and reported upon. Will you use any tools4 such as projectmanagement software4 to assist in capturing )arned /alue metricsB *ow will you forecast futureproject costsB Will you re5iew cost performance o5er time4 across wor7 pac7ages or scheduleacti5itiesB

#ur e8ample in this section measures four )arned /alue measurements= &chedule /ariance 9&/4Cost /ariance 9C/4 &chedule Performance nde8 9&P and Cost Performance nde8 9CP. -ormost typical projects these four measurements can pro5ide enough insight for effecti5emanagement without o5erburdening the Project Manager with )arned /alue calculations andmeasurements.

&chedule /ariance 9&/ is a measurement of the schedule performance for a project. t3scalculated by ta7ing the )arned /alue 9)/ and subtracting the Planned /alue 9P/. &ince )/ isthe actual 5alue earned in the project and the P/ is the 5alue our project plan says we shouldha5e earned at this point4 when we subtract what we planned from the actual we ha5e a goodmeasurement which tells us if we are ahead or behind the baseline schedule according to ourproject plan. f &/ is zero4 then the project is perfectly on schedule. f &/ is greater than zero4the project is earning more 5alue than planned thus it3s ahead of schedule. f &/ is less thanzero4 the project is earning less 5alue than planned thus it3s behind schedule.

Cost /ariance 9C/ is a measurement of the budget performance for a project. C/ is calculatedby subtracting 'ctual Costs 9'C from )arned /alue 9)/. 's we already 7now4 )/ is theactual 5alue earned in the project. 'C is the actual costs incurred to date4 thus when we subtractwhat our actual costs from the )/ we ha5e a good measurement which tells us if we are abo5e orbelow budget. f C/ is zero4 then the project is perfectly on budget. f C/ is greater than zero4the project is earning more 5alue than planned thus it3s under budget. f C/ is less than zero4 theproject is earning less 5alue than planned thus it3s o5er budget.

&chedule Performance nde8 9&P measures the progress achie5ed against that which wasplanned. &P is calculated as )/?P/. f )/ is e6ual to P/ the 5alue of the &P is 2. f )/ is lessthan the P/ then the 5alue is less than 24 which means the project is behind schedule. f )/ isgreater than the P/ the 5alue of the &P is greater than one4 which means the project is ahead of

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schedule. ' well performing project should ha5e its &P as close to 2 as possible4 or maybe e5ena little under 2.

Cost Performance nde8 9CP measures the 5alue of the wor7 completed compared to the actualcost of the wor7 completed. CP is calculated as )/?'C. f CP is e6ual to 2 the project isperfectly on budget. f the CP is greater than 2 the project is under budget4 if it3s less than 2 theproject is o5er budget.

Performance of the project will be measured using )arned /alue Management. The followingfour )arned /alue metrics will be used to measure to projects cost performance:

&chedule /ariance 9&/

Cost /ariance 9C/

&chedule Performance nde8 9&P

Cost Performance nde8 9CP

f the &chedule Performance nde8 or Cost Performance nde8 has a 5ariance of between ;.2 and;.% the Project Manager must report the reason for the e8ception. f the &P or CP has a5ariance of greater than ;.% the Project Manager must report the reason for the e8ception andpro5ide management a detailed correcti5e plan to bring the projects performance bac7 toacceptable le5els.

Pe")o"man$e Meas*"e Yello Re+

&chedule Performance nde8 9&P 1etween ;. and ;. or1etween 2.2 and 2.%

0ess Than ;. or (reaterthan 2.%

Cost Performance nde8 9CP 1etween ;. and ;. or

1etween 2.2 and 2.%

0ess Than ;. or (reater

than 2.%

REPORTING&ORMAT"eporting for cost management will be included in the monthly project status report. TheMonthly Project &tatus "eport will include a section labeled4 ECost ManagementF. This sectionwill contain the )arned /alue Metrics identified in the pre5ious section. 'll cost 5ariancesoutside of the thresholds identified in this Cost Management Plan will be reported on includingany correcti5e actions which are planned. Change "e6uests which are triggered based uponproject cost o5erruns will be identified and trac7ed in this report.

COSTARIANCERESPONSEPROCESS

This section of the Cost Management Plan defines the control thresholds for the project and whatactions will be ta7en if the project triggers a control threshold. 's a part of the response processthe Project Manager typically presents options for correcti5e action to the Project &ponsor whowill then appro5e an appropriate action in order to bring the project bac7 on budget. The ProjectManager may propose to increase the budget for the project4 reduce scope or 6uality4 or someother correcti5e action.

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The Control Thresholds for this project is a CP or &P of less than ;. or greater than 2.%. f theproject reaches one of these Control Thresholds a Cost /ariance Correcti5e 'ction Plan isre6uired. The Project Manager will present the Project &ponsor with options for correcti5eactions within fi5e business days from when the cost 5ariance is first reported. Within threebusiness days from when the Project &ponsor selects a correcti5e action option4 the ProjectManager will present the Project &ponsor with a formal Cost /ariance Correcti5e 'ction Plan.The Cost /ariance Correcti5e 'ction Plan will detail the actions necessary to bring the projectbac7 within budget and the means by which the effecti5eness of the actions in the plan will bemeasured. $pon acceptance of the Cost /ariance Correcti5e 'ction Plan it will become a part ofthe project plan and the project will be updated to reflect the correcti5e actions.

COSTC(ANGECONTROLPROCESSTypically the change control process follows the project change control process. f there arespecial re6uirements for the cost change control process4 they should be detailed in this section.

The cost change control process will follow the established project change re6uest process.'ppro5als for project budget?cost changes must be appro5ed by the project sponsor.

PROJECT%'DGETThe budget for this project is detailed below. Costs for this project are presented in 5ariouscategories...-i8ed Costs: H8884888.88Material Costs H8884888.88Contractor Costs H8884888.88Total Project Cost H8884888.88

Management "eser5e H84888.88


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SPONSORACCEPTANCE

'ppro5ed by the Project &ponsor:

IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Date:IIIIIIIIIIIIIIIIIIIIJProject &ponsorKJProject &ponsor TitleK

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cost management plan[1]

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