Chapter 3

Project Cost Management

This part discusses project cost management—one of the Core Three of project management.Cost is a resource sacrificed or foregone to achieve a specific objective, or something given up in exchange, and it is usually measured in monetary units.Project cost can be defined as a summation of various expenses that are consumed during the entire life span of a project, covering the whole process of initiation, plan, implementation, control and closeout.It can be classified in different ways, which are shown in Tab 3-1.

Tab 3-1 Types of Project Cost

Project cost management includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget.Project cost management is primarily concerned with the cost of the resources needed to complete project activities.It should also consider the effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting the product, service, or result of the project.In this sense, project cost management is a challenging task for any project managers.

Project cost management consists of cost estimating, cost budgeting, and cost control.Cost Estimating develops an approximation or estimate of the costs of the resources needed to complete a project.Cost budgeting allocates the overall cost estimate to individual work items to establish a baseline for measuring performance.Cost control means controlling changes to the project budget.These processes interact with each other and with processes in other knowledge areas as well.