Part 26: Knowledge Areas: Project Cost Management
Project Cost Management
- Includes processes to plan, estimate, budget, and control costs
- Estimating and budgeting are separate processes, but may be tightly linked in smaller projects
- Stakeholders may have different requirements for managing costs, which should be considered
- It is important to consider the recurring cost of using, maintaining, and supporting the product or service after the project is complete (spending some money now could save much more money later)
- The financial performance of the product (when it reaches market) may be forecasted/predicted outside of the project
- Remember that a project is temporary and produces a unique result
- Consider our example
- If we are designing an oven, the cost of designing the new oven is the project’s responsibility.
- The cost of manufacturing and shipping the oven is the Organization’s functional responsibility. Why? Manufacturing and shipping will continue to happen after the project is completed.
- The cost of warranty repair is also the Organization’s functional responsibility. Why?
- If we design a cheap oven, and spend less money on the project, down the road, the organization may spend a lot of money repairing ovens under its warranty. These are factors that we, or the organization should consider.
Keep in mind that the organization probably considered many different “what-if” scenarios (cheap oven, expensive oven, mid-range oven) before approving our project. They determined that the design we are working on will be the most profitable.