Introduction
The Project manager creates the project management plan basis inputs from the project team and the key stakeholders.
A Project management plan is a formal, approved document that defines how the project will be executed, monitored, and controlled. [IPECC]
The Project Management Plan or Project Plan as referred to comprise of Baselines and subsidiary plans supported by supporting and planning documents acting as reference points.
The objective of preparing Project Plan is to define the approach the project team takes to deliver the intended project management scope of the project, which in turn enables to achieve goals and objectives.
- Baselines for scope, schedule, and cost
- Management plans for scope, schedule, cost, quality, human resources, communications, risk, and procurement
- Requirement management plan
- Change management plan
- Configuration management plan
- Process improvement plan
What is Cost Management Plan
A cost management plan is a method of strategizing the planning and execution of a project’s budget. This is done or prepared in order to complete your project on time and on budget. In absence of proper cost management plan in place, both of those things will falter—costing you as PM and your organization immensely.Four important inputs to cost management plan
- Resource Planning – Work Break Down Structure (WBS) acting as key input
- Cost Estimation
- Budgeting – Budgets are formed and approved after the estimation phase, and are typically released for the project in a series of phases depending on the project’s progress. [In terms of PRINCE2 – Management Stage] This will help the project reach its milestones within each budgetary phase, rather than trying to match an overall project budget
- Cost Control – Cost control is simple—you’ll measure your project’s dollar value performance against your total cost and timeline. This will help provide a benchmark throughout the project process
Some Important Terms used while preparing Cost Management Plan
- WBS
- Cost Baseline
- Control Threshold
- Earned Value Measurement / EVM
- Estimation Techniques – Bottom-Up, Analogus & Parametric
Key to Successful Cost Management Plan
- Effective Stakeholders Management and Communication
- Effective use of WBS – Not mapping every step necessary to reach your project’s final deliverable is going to impact your budget, and in so doing, your cost management plan
- Must use Cost Management/Budgeting tool for planning and tracking
Summary
As seen above, Cost Management Plan will help PM to both plan for the project cost, and manage your project cost throughout the course of the project’s life cycle. [IPECC]
As PM project is underway, project expenses will be thoroughly documented throughout the project so that your project can stay within budget.
FAQs
Q1: What is a Cost Management Plan?
A1: A Cost Management Plan is a strategic document that outlines how a project or organization will estimate, allocate, and control costs throughout its lifecycle.
Q2: Why is a Cost Management Plan essential for a project?
A2: A Cost Management Plan is crucial because it helps in tracking and managing project expenses, ensuring that the project stays within budget and that resources are allocated efficiently.
Q3: What are the key components of a Cost Management Plan?
A3: The key components of a Cost Management Plan typically include cost estimation methods, budgeting processes, cost monitoring and control procedures, and risk assessment related to cost overruns.
Q4: How can I create an effective Cost Management Plan?
A4: To create an effective Cost Management Plan, you should start by defining clear project objectives, identifying all potential costs, selecting appropriate cost estimation techniques, establishing a realistic budget, and implementing robust monitoring and control mechanisms.
Q5: What are the consequences of not having a well-defined Cost Management Plan?
A5: Not having a well-defined Cost Management Plan can lead to cost overruns, resource misallocation, project delays, and, in some cases, project failure due to the inability to control and manage expenses effectively.
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