How do you leverage project cost management best practices and standards?

1 Align cost management with project objectives

The first step in effective project cost management is to align your cost management plan with your project objectives, scope, and deliverables. This means defining the cost baseline, the performance measurement baseline, and the change control process for your project. You should also identify the key stakeholders, their expectations, and their roles and responsibilities in cost management. By aligning your cost management with your project objectives, you will ensure that your project costs are realistic, measurable, and aligned with the value and benefits of your project.

2 Apply cost estimation techniques

The next step in project cost management is to apply appropriate cost estimation techniques to estimate the resources and activities required for your project. There are different types of cost estimation techniques, such as analogous, parametric, bottom-up, and three-point estimation. You should choose the technique that best suits your project characteristics, such as complexity, uncertainty, and availability of data. You should also consider the level of accuracy, reliability, and validity of your estimates. By applying cost estimation techniques, you will be able to forecast the expected costs of your project and allocate sufficient funds and resources.

3 Establish a realistic budget

The third step in project cost management is to establish a realistic budget for your project based on your cost estimates and other factors, such as contingencies, reserves, and risks. A budget is a detailed breakdown of the authorized and allocated costs for each project component, phase, and deliverable. You should use a cost management software or tool, such as Microsoft Project, to create and manage your budget. You should also review and update your budget regularly to reflect any changes or deviations from your cost baseline. By establishing a realistic budget, you will be able to monitor and control your project spending and cash flow.

4 Monitor and control costs

The fourth step in project cost management is to monitor and control your project costs throughout the project life cycle. This means measuring and analyzing the actual costs incurred against the planned costs and identifying any variances or discrepancies. You should use cost performance indicators, such as cost variance (CV), cost performance index (CPI), and earned value analysis (EVA), to evaluate your project cost performance and progress. You should also implement corrective actions, such as adjusting resources, scope, schedule, or quality, to bring your project costs back on track. By monitoring and controlling your project costs, you will be able to ensure that your project is within budget and meets its objectives.

5 Communicate and report costs

The fifth step in project cost management is to communicate and report your project costs to your stakeholders, such as sponsors, clients, team members, and vendors. This means providing timely, accurate, and relevant information and feedback on your project cost status, performance, issues, and changes. You should use various communication and reporting tools and methods, such as dashboards, charts, graphs, tables, and narratives, to present and explain your project costs. You should also tailor your communication and reporting style and frequency to suit your stakeholder needs and preferences. By communicating and reporting your project costs, you will be able to build trust, transparency, and accountability among your stakeholders.

6 Follow cost management standards

The sixth step in project cost management is to follow the cost management standards and best practices that are relevant and applicable to your project. These standards and best practices are established by professional organizations, such as the Project Management Institute (PMI), the International Organization for Standardization (ISO), and the Association for the Advancement of Cost Engineering (AACE). They provide guidelines, frameworks, methodologies, tools, and techniques for effective project cost management. By following cost management standards and best practices, you will be able to enhance your project quality, consistency, and compliance.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?