CAPTER 4
PROJECT COST MANAGEMENT
What is Cost and Project Cost Management
Cost is a resource sacrificed or foregone to achieve a specific objective or something given up
in exchange
Costs are usually measured in monetary units like dollars
Project cost management includes the processes required to ensure that the project is completed
within an approved budget
Project Cost Management Processes
Resource planning: determining what resources and quantities of them should be used
Cost estimating: developing an estimate of the costs and resources needed to complete a
project
Cost budgeting: allocating the overall cost estimate to individual work items to establish a
baseline for measuring performance
Cost control: controlling changes to the project budget
Plan Cost Management
Plan Cost Management is the process of defining how the project costs will be estimated,
budgeted, managed, monitored, and controlled.
The key benefit of this process is that it provides guidance and direction on how the
project costs will be managed throughout the project.
This process is performed once or at predefined points in the project.
Estimate Costs
Estimate Costs is the process of developing an approximation of the cost of resources
needed to complete project work.
The key benefit of this process is that it determines the monetary resources required for
the project.
This process is performed periodically throughout the project as needed.
Determine Budget
Determine Budget is the process of aggregating the estimated costs of individual activities
or work packages to establish an authorized cost baseline.
The key benefit of this process is that it determines the cost baseline against which project
performance can be monitored and controlled.
This process is performed once or at predefined points in the project.
Cost Control
Control Costs is the process of monitoring the status of the project to update the project
costs and managing changes to the cost baseline.
The key benefit of this process is that the cost baseline is maintained throughout the
project.
This process is performed throughout the project
EVM Terminologies
Schedule Variance : Difference between projected
schedule and actual schedule.(EV-PV)
Schedule Performance Index : A measure of how
close the project is to performing work as it was
actually scheduled.(EV/PV)
Cost Variance : Difference between projected cost
and actual cost.(EV-AC)
Cost Performance Index : A measure of how close
the project is to spending on the work performed
to what was planned to have been spent. (EV/AC)
EV Term Value What does it mean?
BAC $400 The total project budget is $400.
PV $200 It is the end of the day Tuesday. Two sides
should be completed. The budget value of two
sides is $200.
EV $100 Only the north side is completed. The budgeted
value of one side is $100.
AC $400 We have spent $400 for the work that is
complete
Determine Value
BAC Budget at Completion $400
PV Planned value $200
EV Earned value $100
AC Actual cost $400
SV Schedule Variance
SPI Schedule Performance Index
CV Cost Variance
CPI Cost Performance Index
