Lecture Project management in practice - Chapter 8: Project cost management

Lecture Project management in practice - Chapter 8: Project cost management. This chapter presents the following content: From work package to budget, a project perspective of cost management, cost management plan, simple time-phased budgeting,...

CHAPTER 8

Project Cost Management

From Work Package to Budget

C ore elements of project cost management

A Project Perspective of Cost Management

• Large Capital Items

– The project manager should specifically identify any large capital items that will

have to be purchased by the project

• Long Lead-Time Items

– Items (products/services) that have a long lead-time must be identified early in the

project life cycle

Cost Management Plan

Consider…

• Governance, policy

and procedure

• Contingency

• Estimating

• Lessons learned

• Funding sources

• Systems

And…

• Large Capital Items

• Long Lead-Time Items

• CoQ

Simple time-phased budgeting

W hen estimating identified costs associated with

the Work Packages, don’t forget:

• Other costs not included in the tasks and/or

work packages Examples of these would

include the cost of the project manager,

office space, telephone costs, ICT

equipment and employment overheads

• The project’s cash in-flows (income)

Simple Time-phased Budgeting (cont.)

Simple

project

budget

structure,

by category

Simple Time-phased Budgeting

(cont.)

Simple

project

budget

structure,

by WBS

items

More Complex Time-phased

Project Budgets

Direct labour budget roll-up ($000)

More Complex Time-phased

Project Budgets (cont.)

Two time-phased work packages (labour cost only)

Patient Entry Project

Patient entry project: Time-phased work packages assigned

Project Scope Integration

Key Terms

• actual (value)

• baseline

• contingency

• cost baseline

• finance/ERP systems

• large capital items

• long lead-time items

• make or buy analysis

• planned (value)

• time-phased budget

• variance