Project Management: A Systems Approach to Planning, Scheduling, and Controlling, Tenth Edition

Cost Control

15.0 INTRODUCTION

PMBOK^® Guide, 4th Edition

7.3 Cost Control

Cost control is equally important to all companies, regardless of size. Small companies generally have tighter monetary controls because the failure of even one project can put the company at risk, but they have less sophisticated control techniques. Large companies may have the luxury to spread project losses over several projects, whereas the small company may have few projects.

Many people have a poor understanding of cost control. Cost control is not only “monitoring” costs and recording data, but also analyzing the data in order to take corrective action before it is too late. Cost control should be performed by all personnel who incur costs, not merely the project office.

Cost control implies good cost management, which must include:

• Cost estimating
• Cost accounting
• Project cash flow
• Company cash flow
• Direct labor costing
• Overhead rate costing
• Other tactics, such as incentives, penalties, and profit-sharing

Cost control is actually a subsystem of the management cost and control system (MCCS) rather than a complete system per se. This is shown in Figure 15-1, where the MCCS is represented as a two-cycle process: a planning cycle and an operating cycle. The operating cycle is what is commonly referred ...