5th Edition PMBOK® Guide—Chapter 7: Cost Management Knowledge Area

After Chapter 6, which discusses Time Management, the next knowledge area in Chapter 7 covers the last of the three major “triple constraints”, that of cost, and the purpose of this knowledge area is so that the project can be completed within the approved budget.

There are four project management processes in the Cost Management Knowledge Area. Three of these are in the Planning Process Group and one is the Monitoring & Controlling Process Group.

The first planning process, that of Plan Cost Management, creates the Cost Management Plan which is the framework for all of the other processes. (NOTE: In the 4th Edition, this plan was created not as a separate process, but as part of the Develop Project Management Plan process in the Integration Knowledge Area.)

The second planning process creates the estimate of the costs of the individual activities which are then aggregated in the third planning process to determine the project budget, also known as the cost baseline. In the fourth process, in the Control Costs process in the Monitoring & Controlling Process Group, the actual costs of the project are measured as throughout the rest of the project as compared to this cost baseline, and changes are requested if there is a significant enough variance detected from that baseline.





Process Description
Planning 7.1 Plan Cost Management Establishes policies, procedures, and documentation for planning, managing, expending, and controlling project costs.
Planning 7.2 Estimate Costs Develops an approximation of the monetary resources needed to complete project activities.
Planning 7.3 Determine Budget Aggregates the estimated costs of individual activities or work packages in order to establish an authorized cost baseline.
Monitoring & Controlling 7.4 Control Costs Monitors the status of the project to update the project costs and manages changes to the cost baseline.

The next post will go over the first of these processes, the planning process 7.1 Plan Cost Management.

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