Project Management ToolBox, 3rd Edition

15COST MANAGEMENT

Project cost management involves management of the processes required to ensure that project work is accomplished within an approved budget, assessing changes to the budget based upon changes to the project, establishing a new budget baseline when necessary, and ensuring budget variances do not exceed the established threshold. Generally, there is minimal concern if work is completed under budget, so primary attention is focused on preventing budget overruns. The primary exception being if a budget underrun indicates work is not being performed as planned.

Budget variances are common and need to be a primary focus of project managers during the execution stage of a project (see “Common Reasons for Cost Overruns”). Cost variances caused by scope changes or major resource adjustments are fairly easy to detect. However, most budget under and overruns occur one day at a time and are more difficult to detect. Project managers need to be vigilant about preventing budget variances from accumulating to an unacceptable level. To do so, they need to have tools that provide early warning of potential and realized budget slips.

The tools presented in this chapter provide a variety of/options for early-warning detection of budget variances. Some tools are more suited for smaller projects, some for larger projects, others for complex projects, and still others for simple projects. Since the type of project a project manager will be called upon to manage will likely vary ...