This project management activity defines policies and procedures to plan, manage and control costs on the project. This helps you create the Cost management plan, which is part of Project management plan.
What do you need to create Cost Mgmt Plan?
Project management plan – the information used from this is scope baseline and schedule baselines, and other relevant information such as risks and communication needs related to cost management. Project charter contains summary budget information and budget approval needs. You’ll also be referring to the published industry specific labor rates, project management information systems, and lessons learned while managing costs in other earlier projects, any templates and policies governing cost management specific to the organization, financial knowedge bases and so on.
How do you do it?
In most cases experts sit together and create the Cost management plan based on their experience. In some cases analytical techniques such as payback period, return on investment (ROI), internal rate of return, discounted cash flow and net present value are used. Certain decisions such as project funding and ways to finance project resources decide which of these techniques to be used. Some of the alternatives available for project funding are funding with equity, funding with debt and self-funding. Resources can be rented, leased, purchased or made in-house.
Cost Management Plan
Following mind map is self-explanatory and shows the contents of Cost management plan and their purposes. Click to open in a new window.