Cost Management Plan
The cost management plan is a component of the project management plan that describes how project costs will be planned, structured, estimated, budgeted, and controlled.
Explanation
The cost management plan establishes the criteria and activities for developing, managing, and controlling the project budget. It documents the level of accuracy required for estimates, the units of measure to be used, organizational procedures and links, control thresholds, and rules for earned value measurement.
Key elements of the cost management plan include the level of precision (degree of rounding), level of accuracy (acceptable range for estimates), organizational procedures links (such as the WBS component used for cost accounting), control thresholds (variance amounts that trigger action), rules of performance measurement for EVM, and reporting formats and frequency.
The cost management plan may also establish the funding limit reconciliation approach, which addresses how expenditures will be reconciled with funding limits. This plan guides the project team through all cost-related decisions and activities.
Key Points
- •Component of the project management plan
- •Defines units of measure, level of precision, and level of accuracy
- •Establishes control thresholds for cost variance
- •Specifies EVM rules of performance measurement
Exam Tip
The cost management plan is a subsidiary plan within the project management plan. Know the difference between the plan itself and the outputs of the processes it governs.
Frequently Asked Questions
Related Topics
Plan Cost Management
Plan Cost Management is the process of defining how project costs will be estimated, budgeted, managed, monitored, and controlled.
Cost Baseline
The cost baseline is the approved version of the time-phased project budget, excluding management reserves, used as a reference for measuring and monitoring cost performance.
Project Budget
The project budget is the total authorized funds allocated for the project, composed of the cost baseline plus management reserves.
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Relative Estimation
Relative Estimation is an agile technique where work items are sized in comparison to each other rather than in absolute units like hours or days, providing faster and more accurate estimates.
Power/Influence Grid
The power/influence grid is a stakeholder classification model that groups stakeholders based on their level of authority (power) and their active involvement or ability to affect the project (influence).
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Cost Management
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