Cost management plan
“Cost Management Plan” is an output for the process “Plan cost management”.
The cost management plan is a component of the project management plan and describes how the project costs will be planned, structured, and controlled. The cost management processes and their associated tools and techniques are documented in the cost management plan.
For example, the cost management plan can establish the following: – U nits of measure. Each unit used in measurements (such as staff hours, staff days, weeks for time measures; or meters, liters, tons, kilometers, or cubic yards for quantity measures; or lump sum in
currency form) is defined for each of the resources.
– Level of precision. The degree to which activity cost estimates will be rounded up or down (e.g., US$100.49 to US$100, or US$995.59 to US$1,000), based on the scope of the activities and magnitude
of the project.
– Level of accuracy. The acceptable range (e.g., ñ10%) used in determining realistic activity cost estimates
is specified, and may include an amount for contingencies;
– Organizational procedures links. The work breakdown structure (WBS) provides the framework for the cost management plan, allowing for consistency with the estimates, budgets, and control of costs. The WBS component used for the project cost accounting is called the control account.
Each control account is assigned a unique code or account number(s) that links directly to the performing
organization?s accounting system.
– Control thresholds. Variance thresholds for monitoring cost performance may be specified to indicate an agreed-upon amount of variation to be allowed before some action needs to be taken. Thresholds are
typically expressed as percentage deviations from the baseline plan.
– Rules of performance measurement. Earned value management (EVM) rules of performance measurement are set. For example, the cost management plan may: ?? Define the points in the WBS at which measurement of control accounts will be performed;
?? Establish the earned value measurement techniques (e.g., weighted milestones, fixed-formula, percent complete, etc.) to be employed; and ?? Specify tracking methodologies and the earned value management computation equations for calculating projected estimate at completion (EAC) forecasts to provide a validity check on the bottom-up EAC.
For more specific information regarding earned value management, refer to the Practice Standard for
Earned Value Management ? Second Edition.
– Reporting formats. The formats and frequency for the various cost reports are defined.
– Process descriptions. Descriptions of each of the other cost management processes are documented.
– Additional details. Additional details about cost management activities include, but are not limited to: ?? Description of strategic funding choices, ?? Procedure to account for fluctuations in currency exchange rates, and ?? Procedure for project cost recording.
“Cost Management Plan” is an input for the process “Estimate costs”.
The cost management plan defines how project costs will be managed and controlled. It includes the method used and the level of accuracy required to estimate activity cost.
“Cost Management Plan” is an input for the process “Determine budget”.
The cost management plan describes how the project costs will be managed and controlled.
“Cost Management Plan” is an input for the process “Identify risks”.
The cost management plan provides processes and controls that can be used to help identify risks across the project.
“Cost Management Plan” is an input for the process “Perform Quantitative Risk Analysis “.
The cost management plan provides guidelines on establishing and managing risk reserves.
This definition was found in the PMBOK V5
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