Cost planning and control is the estimation of costs, the setting of an agreed budget, and management of actual and forecast costs against that budget.
Definition from APM Body of Knowledge 7th edition
Cost planning is an essential part of the project management process. Project managers need to understand where costs fall in their schedule to manage demand for resources.
Typically, all resources that consume costs will be included in a resource optimised schedule. This type of schedule is essential to cost planning, to help build up picture of planned costs over time.
Planned costs can be fixed or variable. A fixed cost happens once in the life of a project, for example, a machine setup. A variable cost happens more than once over the life of a project, for example, component machining.
Cost control is the process of collecting actual costs and collating them in a format to allow comparison with project budgets. Cost control is necessary to keep a record of monetary expenditure for purposes such as:
Cost control information is fundamental to the lessons learned process, as it can provide a database of actual costs against activities and work packages that be used to inform future projects.
Cost budgets usually start with a procurement strategy and the cost breakdown structure (CBS). The CBS defines the level at which costs will be collected. Its purpose is to allow budgets to be set and costs to be collected, recorded and controlled.
APM's Planning, Scheduling, Monitoring and Control (2015)
Diagram: Cost breakdown structure (CBS). Copyright APM
Making the case for investing in project controls
It’s possible that you are a senior manager in an industry not applying formal project controls. Or you may be a senior manager in an industry that has relied on project professionals for decades. This guide can help you introduce, improve or innovate in the field of project controls. I wish you every success!
I hail from the construction industry which has a poor public image. Whilst it may have a poor reputation it has established techniques and processes that provide highly effective controls which other sectors could benefit from... read more.
APM LearningThe following cost planning resources are available on APM Learning. This is a member only resource.
The APM Body of Knowledge 7th edition is a foundational resource providing the concepts, functions and activities that make up professional project management. It reflects the developing profession, recognising project-based working at all levels, and across all sectors for influencers, decision makers, project professionals and their teams.
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Project – APM's official journal – is circulated quarterly for members only, and online for regularly updated news, blogs, opinions and insights for those in the project community.
