6th Edition PMBOK® Guide–Process 7.1 Plan Cost Management: Inputs

This is the first process for the cost management knowledge area, and it follows the same pattern as the first planning process for ALL knowledge areas, namely, it is called “Plan X Management”, where “X” is the name of the knowledge area, and it has as its output the “X Management Plan” which outlines any guidelines or procedures for doing all of the other processes in that knowledge area.

So let’s start going over the inputs of this knowledge area.

7.1.1 Plan Cost Management:  Inputs Project Charter

The project charter, the output of process 4.1 Develop Project Charter, may contain pre-approved financial resources from which the detailed project costs are developed, such as a certain budget within the organization. Project Management Plan

The other knowledge area plans that may impact the creation of the cost management plan:

  • Schedule management plan–certain processes and controls may impact cost estimation and management.   For example, crashing a schedule to reduce the estimate of the duration of an activity usually has the impact of increasing the cost estimate for that activity.   This is because “crashing” means adding resources to get an activity done more quickly, and those additional resources will add to the cost of that activity.
  • Risk management plan–there are processes and controls that may impact cost estimation and management.   For example, 11.5 Plan Risk Responses may cause additional costs to the project which are justified by the reduction of risk to the project.   For example, if certain data is critical to a company, then in developing a new system to use that data, the additional cost of a “mirror server” may be incurred to always make sure the original data is never lost or destroyed.   The extra cost is justified because the negative impacts of losing that data would be catastrophic for the project. Enterprise Environmental Factors

Among the factors listed in the PMBOK guide, the ones that are most pertinent are:

  • Organizational culture and structure can influence cost management.  For example, whether a project exists in a functional, matrix, or projectized organizational culture environment will have an effect on how decisions are made with regards to the costs of the project.
  • Market conditions will describe the costs of products, services, or results similar to the ones being proposed to be created by the project, and will therefore set a benchmark for their pricing.
  • PMIS (project management information system)-used as a tool to create the project budget, the software is considered an EEF by PMIS.   The data created by the organizational from previous projects using that software, however, are considered Organizational Process Assets (see below)
  • Published commercial information on resource costs provide standard costs for resources commonly used on the project. Organizational Process Assets

  • An organization’s financial control procedures (what accounting codes are to be used when keeping track of expenses on projects, etc.)
  • Historical information and lessons learned repository, especially from projects which are similar to the one being proposed
  • Policies, procedures, and guidelines specifically for cost estimating and budgetin

These are the inputs to the process; the next post will cover the tools and technique  which are the “generic” ones that are used for any planning process for a knowledge area:  namely, expert judgment, data analysis, and meetings.


2 Responses

  1. Hi Jerome, I want you to know how much I appreciate the time you take and how helpful your PMBOK PMP review is for helping me prepare for the exam. I took the online course from Simplilearn and have the 35 PDUs, but your review more helpful.

    Warm regards,

    Debbie Knight Debbie.Knight@dkinnovative.com 201-602-2190

  2. Hi Jerome,
    Thank you helping me understand cost management a lot better. I am currently taking the one boot camp class and wanted to compare my notes with your. Mikelle

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