Megaproject Management: Lessons on Risk and Project Management from the Big Dig

Chapter 8

Cost Management

Everyone is entitled to his own opinion, but not to his own facts.

—Daniel Patrick Moynihan

Introduction

In Chapter 7, we discovered that many factors contribute to the dramatic cost increases on megaprojects and, in particular, on the Big Dig. The reasons behind these cost increases can vary from project to project, but all projects require that certain essential processes and procedures be in place to ensure the Project is completed within the approved budget. In accordance with A Guide to the Project Management Body of Knowledge (PMBOK^® Guide)—Fifth Edition, the essential processes for effective cost management include:

1. Planning: Determining the resources, people, equipment, and materials necessary to perform each project activity.

2. Cost estimating: Developing an approximation of the costs of the resources needed to complete each project activity.

3. Cost budgeting: Allocating the overall cost estimate to individual work items, that is, how much money will be spent and when it will be spent.

4. Cost control: Controlling changes to the project budget.

Each of these processes interacts with the others and with all of the processes and procedures in the other project management knowledge areas as well. Many of the processes and procedures described in this chapter go beyond the typical approaches used by project managers to manage cost. The reason for a special approach to cost management is evident: Megaprojects involve numerous technological and ...