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Project Cost Management
Cost management (Project Cost Management or PCM) is the process of estimating, allocating and controlling the costs of a project. It allows companies to know in advance the expenses and thus reduce the chances of exceeding the initial budget. Therefore, the cost management of the project covers its entire life cycle, from initial planning to delivery, through the different intermediate analyzes that are carried out. Project Cost Management includes the processes involved in estimating, budgeting and controlling costs so that the project is completed within the approved budget.
These processes interact with each other and with processes in other areas of knowledge. Depending on the needs of the project, each process can involve the effort of one person or group of people. Each process is executed at least once in each project and in one or more phases of the project, in case the project is divided into phases. Although the processes are presented here as differentiated components with well-defined interfaces, in practice they overlap and interact in ways not detailed here. In some projects, especially in smaller ones, cost estimation and cost budget preparation are closely linked to being considered as a single process, which can be performed by a single person in a relatively short period of time.
Estimation of Project Costs
Once you know the activities to be carried out and the resources that are needed, it is time to transfer these resources to monetary and temporary units. For this, there are multiple estimation methods according to available information. A simple way to estimate the costs of a project is to establish analogies with similar projects that have been done recently. If they do not exist, an older project should be taken and a correction made in accordance with the economic changes that may have occurred: fluctuations in currency exchange, revaluation or depreciation of raw materials.
In case of more information, it is possible to use parametric models in which the costs of the project are represented mathematically. Regardless of the chosen system, it is essential to have methods of monitoring the costs throughout the project. This information will allow a constant adjustment and, therefore, estimate the final budget with greater accuracy and in real time. In estimating the costs of a project you should also consider the possible occurrence of risks, the impact they may have on the project as a whole and the frequency with which they can be presented
What do we do?
- Planning and management of the costs of the product or service
- Costs relevant to decision making
- Standard Costs and Flexible Costs
- Identification of process improvement
- Audit and technical mapping of processes
- The Budgeting Technique
- Flexible quotes
- The zero base budget
- Integrated scorecard (BSC) integrated to budget management
- Exercises developed
Project cost management at us includes;
Project cost control includes:
- Influencing factors that produce changes in the cost baseline.
- Ensure that all requests for change are made in a timely manner.
- Manage real changes when and as they happen.
- Ensure that expenditures do not exceed the authorized funding for the project, both per period and total.
- Monitor cost performance to detect and understand variations from the approved cost baseline.
- Monitor the performance of work in relation to the funds in which it has been incurred.
- Avoid including unapproved changes in cost reporting or resource utilization.
- Inform relevant stakeholders of all approved changes and associated costs.
- Carry out actions to maintain the expected overcharges within acceptable limits.