2- Cost Mgt Importance

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o Introduction to Cost and Cost Mgt

o Why Cost Mgt is Important on Projects?

o Project Cost Mgt Outcomes

o Cost Mgt Processes

o Project Cost Mgt PMI Process Overview

February 3, 2012 Sana Ullah Khan PE, PMP 2

Session Objectives



o Cost is a resource sacrificed or foregone to achieve a specific

objective, or something given up in exchange.

o Costs are usually measured in monetary units, such as dollars.

o Project cost management includes the processes required to

ensure that the project is completed within an approved budget.


What is Cost and Project Cost Management?



o A project is a business, and project managers can be viewed as

CEOs of mini-businesses.

o As such, they are expected to possess solid financial skills in

order to deliver project goods and services to their clients cost eeffectively.

o Effective project management rests on a foundation of good

financial practice.


Why Project Cost Mgt ?



o Until recently, the only financial skills that managers on projects

were required to have were basic budgeting skills.

o However, in the current multidimensional approach, they should

have a solid understanding of:

o cost estimating techniques

o dealing with the time value of money

o conducting cost- benefit analyses

o measuring work performanceo engagement in effective cost control.


Why Project Cost Mgt ?



February 3, 2012 6National Institute of Design and Analysis

When a project manager says:

³We have successfully completed the project´.

He activity means: triple constraints

o On Time!o Within Budget!

o With a High Level of Customer Satisfaction

Certainly, meeting the specifications is a top priority. A project that does not achieve the specs is a project that is

going nowhere.




o The best-known project management tools and techniques address

doing the job on time and emphasis on technical details only.

o Project staff tend to be poorly educated about the business aspects of

projects.

o Less time is devoted to looking at the budget side of project

management.

o Typically, some attention is only given to developing project budgets

and then tracking budget performance once the project is underway.

o Not have many insights on financial issues that go beyond the basics of

budgeting.

o Projects that spend too much and generate too little revenue can drive

their organizations out of business.

Project Pitfalls




Project Cost Mgt Outcomes

Key project team members must have a solid grip o f financial

principles because such understanding contribute to effective

financial management of projects resulting in project success.

o Effective investment decision makingo Effective cost estimation to determine the volume of financial

resources needed

o Effective cost budgeting to ensure optimal allocation of resources to

project activities

o Effective cash flow management to ensure that project funds areavailable in the right quantities and at the right time

o Effective monitoring and evaluation of cost

o performance of projects



Cost estimating:

Developing an approximation or estimate of the costs of the

resources needed to complete a project.

Cost budgeting:

Allocating the overall cost estimate to individual work items to

establish a baseline for measuring performance.

Cost control:

Controlling changes to the project budget.

February 3, 2012 National Institute of Design and Analysis 9

Project Cost Management Processes



February 3, 2012 National Institute of Design and Analysis 10

Project Cost Mgt Overview

2- Cost Mgt Importance

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