Manage Project Cost

Surprisingly the process of managing project costs, as many other areas of project management, requires a set process to be followed. By breaking down the activities involved and following a step-by-step approach, the project team will be in position to address cost estimation, determine the budget and control the project cost.

As mentioned, the size of a project (based on scope) adds or reduces complexity. That means that certain tasks and activities in small size or scope projects will be integrated, which leads to the misinterpretation that these tasks have not been taken into account. That is not the case. Each of those steps is to be taken separately and when appropriate to be integrated. When a project manager or a project team decides to integrate tasks for various reasons, they are effectively affecting the projects lifecycle.

Cost estimation and budgeting is a common area that task integration occurs in small scope projects. Reasons such as prior experience and knowledge, pre-set costs, or fixed budgets can reduce time and complexity. 

A simplistic approach on cost estimation and budgeting can be initiated in parallel with the development of WBS. By allocating cost estimates in each activity and task, effectively a project budget can be produced. Once again, the level of complexity and detail is to follow scope specification and sponsor/stakeholder approval. On a similar note, the process of cost estimation and budgeting can be implemented in parallel with PERT development.

A number of project teams follow the paradigm of “resources pool”; a concept that there is a budgetary allocation for the project and the team is allocating monetary resources in combination with other human and non-human resources. In cases as such, flexibility is exercised and creativity is required.

Links between project cost, project time, and project quality are to be reviewed regularly and reported accordingly. Cost is a finite resource and does affect a number of project parameters. 

BL