CONTROL OF PROJECT

COST MANAGEMENT
SUBMITTE To. SUBMITTED BY.
MS.MANPREET MAM RITIKA SOOD
PROJECT COST MANAGEMENT

Project cost management includes the processes required to ensure

that the project is completed within an approved budget.

Project cost management may be defined as management of the

processes involved in planning, estimating, and controlling costs so
that the project can be completed within the approved budget.
THREE FACTORS

Cost Estimating

Cost Budgeting

Cost Control
Cost Estimating

Developing an approximation or estimate of the costs of the resources

needed to complete a project.
Includes identifying and considering various costing alternatives.
Cost Budgeting

Allocation of overall cost estimates to individual work items in order to

establish a cost baseline for measuring project performances.
Cost Control

Controlling changes to the project budget.

Influencing the factors which create changes to the cost baseline to ensure
that changes are beneficial.
Determining that the cost baseline has changed with in acceptable units
Managing the actual changes when and as they occur.
Tools and techniques of cost control

Earned value management

Estimate to complete
Cost variance
Cost performance index
Earned value management

The earned value technique involves developing these key values for
each schedule activity, work package, or control account.

It compares the amount of work that was planned with what was
actually earned with what was actually spent to determine if cost and
schedule performance are as planned.
• Planned value (PV)
• Earned value (EV)
• Actual value (AV)
Estimate to complete
The PV, EV, and AC values are used in combination to provide
performance measures of whether or not work is being accomplished
as planned at any given point in time.
The most commonly used measures are…….
• cost variance (CV)
• schedule variance (SV)
The amount of variance of the CV and SV values tend to decrease
as the project reaches completion due to compensating effect of
more work being accomplished.
Cost variance

CV equals earned value (EV) minus actual cost (AC). The cost
variance at the end of the project will be the difference between the
budget at the completion (BAC) and the actual amount spent.
Formula: CV=EV-AC
these two values, the CV and SV, can be converted to efficiency
indicators to reflect the cost and schedule performance of any
project.
Cost performance index

 A CPI value less than 1.0 indicate a cost over-run of the estimates.
 A CPI value greater than 1 indicates a cost under-run of the
estimates.
 CPI equals the ratio of the EV to the AC.
 The CPI is the most commonly used cost-efficiency indicator.
 Formula: CPI=EV/AC
 CPI is widely used to forecast project costs at completion.
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