Cost Management Plan

What is the cost management plan?

A cost management plan creates a guide to other processes that are related to cost. The cost management plan typically shows that, if cost estimation and budget creation will be treated as a single process or as two different processes, what will be cost measurement units (Dollars, euro, etc.), cost measurement methods and includes considerations such as the amount of rounding and how performance is measured.

Plan Cost Management Process in PMBOK 6

Plan cost process is a project management process in which a cost management plan is prepared to guide how, where, with what resources, and using what criteria the other three processes in the cost management knowledge area will be implemented.

In general, in this process, we will reveal a document that will describe how to manage the project cost, how to estimate the cost, how to create the budget, and how to monitor and control the cost, how to use measurement methods of the costs realized and provide some kind of guidance to the project team.
Plan cost management process is a part of the planning process group and cost management knowledge area. It is conducted once or at predefined points in the project management life cycle.

Inputs to the plan cost management process

  • Project charter: Since the summary budget contained in the project launch document will be included in the cost management plan, the launch document is used as input.
  • Schedule management plan: It involves everything related to the schedule that can affect the cost of the project.
  • Risk management plan: Project risks, as well as contingency and management reserves, are directly related with cost aspect of the project.
  • Enterprise environmental factors: EEF's like organizational culture, market conditions, currency exchange rates, any commercial information, PMIS are useful factors to use as an input.
  • Organizational process assets: Financial procedures used by the organization, historical data about cost management, lessons learned repository, financial databases, and sectoral guidelines about cost estimation and cost management are good examples of OPA in this process.

Tools and Techniques of plan cost management

  • Alternatives Analysis: When the subject is cost management, there are many points to make decisions and therefore evaluate alternatives. 
  • Meetings: Helps to get opinions and engagement of stakeholders and keeps the project integrated along with the efforts of the project manager.
  • Expert judgment: This is a very basic but useful tool to use as it reflects the opinions of people who have knowledge about the subject. Expert judgment can be gained from a large variety of professionals including independent consultants, cost accountants, representatives from the accounts
  • department, PMO members, former project managers, team members of different projects, etc.

See also our other articles:
How to develop a project management plan