Setting up a cost management plan is an extensive process. It provides the basis for scope management, schedule planning, cost estimating and budgeting, resource planning, value analysis and engineering, risk management and procurement planning. Here are 3 tips to help guide your way:
1. Change Management
Most project systems seek to limit changes during project execution because the difficulty of managing change increases with their number and extent, and changes for a known project performance risk. Changes during project execution can be frustrating. The best approach to limit changes is to establish and use a strong scope development and planning process.
With change management playing such a central role in the project control process, it is important that the procedure is well planned, disciplined, documented, and formally communicated to all project team members. It is critical that each project team member understands the process, roles and responsibilities for identifying, tracking, communicating, approving, and incorporating changes as they occur throughout the project lifecycle. Not doing so might lead to cost overruns and even disputes and claims.
2. Forecasting
During the planning of the forecasting process you define the timing of forecasts, how forecasts are communicated or reported, methodologies to be used, and specific roles and responsibilities for forecasting. The forecasting schedule is often linked to when accounting systems can provide current and accurate historical data, but accounting should not drive forecasting if there is a need for more frequent evaluations if the work is carried out at a faster pace. Communication or reporting of forecasts needs to consider the audience and how information is best provided to project management and stakeholders.
3. Earned value management (EVM)
Scheduling the authorized work is no different than in any large construction project—it is a necessary activity for the success of the project. However, in an earned value management system the schedule will integrate all of the technical, cost and schedule aspects of the work, resulting in the expected sequence of work. Interdependencies are established that result in the total work time and reveal the critical path, which is also the shortest project duration.
Within each task it is then necessary to identify measures to allow for accurate performance assessment each month. A sufficient number of these interim measures will be defined after the detailed schedule is established to ensure the performance is measured as accurately as possible.
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