Dundar F. Kocaoglu
This paper aims to provide a detailed analysis of cost management in the context of project management and provides a brief description of the tools and techniques used in the process of cost management. The project methodology comprises use of both primary and secondary sources for research. The paper begins by identifying the importance of cost management in project management. Cost management is the process which allows companies to control and plan the costs involved in doing a business. It allows a business to predict future expenditures to help reduce the chance of going over budget. Starting a project with cost management helps avoid certain pitfalls that may be present otherwise. The purpose of cost management is to ensure sufficient supply of funds in a timely manner to the firm to meet its funding needs. It therefore becomes imperative to perform a cost benefit analysis of various alternatives before acquiring funds from any particular source. Cost Management is a key contributing factor of business success and provides a metric for measurement of performance. The study then identifies four commonly used steps for cost management - Resource Planning, Cost Estimating, Cost Budgeting and Cost Control. Resource Planning is the process of determining the actual requirements of people, equipment and materials in order to perform project activities. Cost Estimating is the process of developing an approximate estimation of the cost needed to complete the project activities. Cost Budgeting is the process of aggregating the estimated costs of individual activities or work packages establish a total cost baseline for measuring project performance. Cost Control is the process of monitoring the status of the project to update the project budget and managing changes to the cost baseline. A detailed analysis of all the four processes identifying the inputs, tools and techniques and outputs to each process is provided. The remaining part of the paper highlights the common errors and biases that plague the cost estimation process in project management such as committing to the best case scenario, using false analogies, estimation by the wrong personnel etc. The paper concludes by providing key recommendations for sound cost management and overall project management.
Srinivasan, Ramya and Ingale, Rhujuta, "Cost Management in Project Management" (2013). Engineering and Technology Management Student Projects. 420.