4squareviews

The first three processes in this cost management knowledge area are planning processes; this last one is a process in the monitoring and controlling process group.   Ass such, it follows a typical pattern for such processes.   The inputs come from the work performance data (i.e., how much did the activities actually cost?), and the cost management plan (i.e., how much were the activities supposed to cost according to the plan).   The tools and techniques basically do a comparison between the two, and if there is a discrepancy, what PMI likes to term a variance, the cause for this is determined, and the output of the process is a recommendation on how to correct this (the change requests), as well as the results of the analysis done during the process (work performance information).

Let’s go into detail regarding the inputs of this process.

7.4.1 Control Costs:  Inputs

7.4.1.1 Project Management Plan

• Cost Management Plan–this is an output of process 7.1 Plan Cost Management, and it contains guidelines on how to do all the other processes in the cost management knowledge area, including this one.   Here are some specific guidelines that pertain to process 7.4 Control Costs
  • Rules of performance measurement–Earned Value Management or EVM is a tool used in monitoring the performance of a project, including whether it is ahead of, on, or behind schedule.   The rules of how EVM will be used on the project should be specified, usually using one of the two measures Schedule Performance Index (SPI) or Schedule Variance (SV).
  • Control thresholds–once a variance is detected, the threshold should be set (usually in terms of a percentage deviation from the baseline plan as expressed in the SPI) ,so that any amount of variation above that threshold will cause certain actions to be taken.
  • Reporting formats–when the work performance reports are sent to the stakeholders, the formats of those reports, which stakeholders receive them, and the frequency of those reports should be specified.
• Cost baseline–this is an output of the last process 7.3 Determine Budget, and it represents the budget according to plan; it is what the actual costs are compared to in order to determine whether a variance exists.
• Performance measurement baseline–this is used in earned value analysis, which takes the three constraints of scope, schedule and cost and combines them to create a baseline from which to compare the actual results in terms of schedule and cost.  In the case of cost management, the quantities used are the Cost Performance Index (CPI) and the Cost Variance (CV).

7.4.2 Project Documents

The lessons learned register, an output of process 4.4 Manage Project Knowledge, is updated during this process to see if there are any procedures done by the project team that improve cost control; these lessons are stored in the register to be used later on in the project, and possibly on future projects as well.

7.4.1.3 Project Funding Requirements

This is another output of the previous process 7.3 Determine Budget.   This is done if the money for the project budget is not available from the parent organization all at once, and if it is supplied for use by the project team in increments.    In this case, the funding limits for each period are set up, and so it is important for the project manager to make sure that the expenditures during each period do not exceed the amount given by the periodic funding limit.

7.4.1.4 Work Performance Data

This is an output of process 4.3 Direct and Manage Project Work.   The data that pertains to this process include the actual costs that have authorized, incurred, invoiced and paid for activities done on the project.

7.4.1.5 Organizational Process Assets

• Policies, procedures and guidelines related to cost control (should be included in the Cost Management Plan), including methods for monitoring, controlling, and reporting information related to costs
• Cost control tools (the Project Management Information System, if created by another company as in the case of Microsoft Project, is considered an Enterprise Environmental Factor; if a tool is proprietary and created by the organization doing the project, it is an Organizational Process Asset)

The next post will cover the Tools and Techniques used in this process.

Filed under: Uncategorized |