PROJECT COST MANAGEMENT PLAN TEMPLATE

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COST MANAGEMENT PLAN
<PROJECT NAME>
COMPANY NAME
STREET ADDRESS
CITY, STATE ZIP CODE
DATE
Cost Management Plan Template
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TA%LE O& CONTENTS
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Cost Management Plan Template
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INTROD'CTION
The Cost Management Plan clearly defines how the costs on a project will be managed
throughout the project3s lifecycle. t sets the format and standards by which the project costs are
measured4 reported and controlled. The Cost Management Plan:
dentifies who is responsible for managing costs
dentifies who has the authority to appro5e changes to the project or its budget
*ow cost performance is 6uantitati5ely measured and reported upon
"eport formats4 fre6uency and to whom they are presented
The Project Manager will be responsible for managing and reporting on the project3s cost
throughout the duration of the project. During the monthly project status meeting4 the Project
Manager will meet with management to present and re5iew the project3s cost performance for the
preceding month. Performance will be measured using earned 5alue. The Project Manager is
responsible for accounting for cost de5iations and presenting the Project &ponsor with options
for getting the project bac7 on budget. The Project &ponsor has the authority to ma7e changes to
the project to bring it bac7 within budget.
COST MANAGEMENT APPROAC(
This section you e8plain your approach to cost management for your project.
We chose to create Cost 'ccounts at the fourth le5el of the W1& as an e8ample since many
project management offices don3t ha5e a Project Management nformation &ystem. f you are
using a Project Management nformation &ystem then you can4 and should4 manage costs down
to the wor7 pac7age le5el. -or those who don3t ha5e a Project Management nformation &ystem
you3ll want to determine which le5el of the W1& you can most effecti5ely manage the project3s
costs from. The further down in the W1& you go4 the more detailed your cost management is.
*owe5er4 you should balance the granularity at which you want to manage costs against the
amount of effort it ta7es to manage at that le5el. The more granular your cost management4 the
more wor7 is necessary to manage it.
Costs for this project will be managed at the fourth le5el of the Wor7 1rea7down &tructure
9W1&:. Control 'ccounts 9C': will be created at this le5el to trac7 costs. )arned /alue
calculations for the C'3s will measure and manage the financial performance of the project.
'lthough acti5ity cost estimates are detailed in the wor7 pac7ages4 the le5el of accuracy for cost
management is at the fourth le5el of the W1&. Credit for wor7 will be assigned at the wor7
pac7age le5el. Wor7 started on wor7 pac7ages will grant that wor7 pac7age with .;< credit=
whereas4 the remaining .;< is credited upon completion of all wor7 defined in that wor7
pac7age. Costs may be rounded to the nearest dollar and wor7 hours rounded to the nearest
whole hour.
Cost 5ariances of >?@ ;.2 in the cost and schedule performance inde8es will change the status of
the cost to cautionary= as such4 those 5alues will be changed to yellow in the project status
reports. Cost 5ariances of >?@ ;.% in the cost and schedule performance inde8es will change the
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status of the cost to an alert stage= as such4 those 5alues will be changed to red in the project
status reports. This will re6uire correcti5e action from the Project Manager in order to bring the
cost and?or schedule performance inde8es below the alert le5el. Correcti5e actions will re6uire a
project change re6uest and be must appro5ed by the Project &ponsor before it can become within
the scope of the project.
MEAS'RING PROJECT COSTS
This section defines how the project3s costs will be measured. The PM1#A focuses on )arned
/alue Management for measuring and controlling a project3s costs. )arned /alue Management
is a broad and powerful tool= as such4 we recommend that all project managers ta7e some formal
courses in )arned /alue Management.
n this section you should detail how you will measure the project costs. What )arned /alue
measurements will be captured and reported upon. Will you use any tools4 such as project
management software4 to assist in capturing )arned /alue metricsB *ow will you forecast future
project costsB Will you re5iew cost performance o5er time4 across wor7 pac7ages or schedule
acti5itiesB
#ur e8ample in this section measures four )arned /alue measurements= &chedule /ariance 9&/:4
Cost /ariance 9C/:4 &chedule Performance nde8 9&P: and Cost Performance nde8 9CP:. -or
most typical projects these four measurements can pro5ide enough insight for effecti5e
management without o5erburdening the Project Manager with )arned /alue calculations and
measurements.
&chedule /ariance 9&/: is a measurement of the schedule performance for a project. t3s
calculated by ta7ing the )arned /alue 9)/: and subtracting the Planned /alue 9P/:. &ince )/ is
the actual 5alue earned in the project and the P/ is the 5alue our project plan says we should
ha5e earned at this point4 when we subtract what we planned from the actual we ha5e a good
measurement which tells us if we are ahead or behind the baseline schedule according to our
project plan. f &/ is zero4 then the project is perfectly on schedule. f &/ is greater than zero4
the project is earning more 5alue than planned thus it3s ahead of schedule. f &/ is less than
zero4 the project is earning less 5alue than planned thus it3s behind schedule.
Cost /ariance 9C/: is a measurement of the budget performance for a project. C/ is calculated
by subtracting 'ctual Costs 9'C: from )arned /alue 9)/:. 's we already 7now4 )/ is the
actual 5alue earned in the project. 'C is the actual costs incurred to date4 thus when we subtract
what our actual costs from the )/ we ha5e a good measurement which tells us if we are abo5e or
below budget. f C/ is zero4 then the project is perfectly on budget. f C/ is greater than zero4
the project is earning more 5alue than planned thus it3s under budget. f C/ is less than zero4 the
project is earning less 5alue than planned thus it3s o5er budget.
&chedule Performance nde8 9&P: measures the progress achie5ed against that which was
planned. &P is calculated as )/?P/. f )/ is e6ual to P/ the 5alue of the &P is 2. f )/ is less
than the P/ then the 5alue is less than 24 which means the project is behind schedule. f )/ is
greater than the P/ the 5alue of the &P is greater than one4 which means the project is ahead of
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schedule. ' well performing project should ha5e its &P as close to 2 as possible4 or maybe e5en
a little under 2.
Cost Performance nde8 9CP: measures the 5alue of the wor7 completed compared to the actual
cost of the wor7 completed. CP is calculated as )/?'C. f CP is e6ual to 2 the project is
perfectly on budget. f the CP is greater than 2 the project is under budget4 if it3s less than 2 the
project is o5er budget.
Performance of the project will be measured using )arned /alue Management. The following
four )arned /alue metrics will be used to measure to projects cost performance:
&chedule /ariance 9&/:
Cost /ariance 9C/:
&chedule Performance nde8 9&P:
Cost Performance nde8 9CP:
f the &chedule Performance nde8 or Cost Performance nde8 has a 5ariance of between ;.2 and
;.% the Project Manager must report the reason for the e8ception. f the &P or CP has a
5ariance of greater than ;.% the Project Manager must report the reason for the e8ception and
pro5ide management a detailed correcti5e plan to bring the projects performance bac7 to
acceptable le5els.
Pe")o"man$e Meas*"e Yello Re+
&chedule Performance nde8 9&P: 1etween ;.C and ;.D or
1etween 2.2 and 2.%
0ess Than ;.D or (reater
than 2.%
Cost Performance nde8 9CP: 1etween ;.C and ;.D or
1etween 2.2 and 2.%
0ess Than ;.D or (reater
than 2.%
REPORTING &ORMAT
"eporting for cost management will be included in the monthly project status report. The
Monthly Project &tatus "eport will include a section labeled4 ECost ManagementF. This section
will contain the )arned /alue Metrics identified in the pre5ious section. 'll cost 5ariances
outside of the thresholds identified in this Cost Management Plan will be reported on including
any correcti5e actions which are planned. Change "e6uests which are triggered based upon
project cost o5erruns will be identified and trac7ed in this report.
COST ,ARIANCE RESPONSE PROCESS
This section of the Cost Management Plan defines the control thresholds for the project and what
actions will be ta7en if the project triggers a control threshold. 's a part of the response process
the Project Manager typically presents options for correcti5e action to the Project &ponsor who
will then appro5e an appropriate action in order to bring the project bac7 on budget. The Project
Manager may propose to increase the budget for the project4 reduce scope or 6uality4 or some
other correcti5e action.
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Cost Management Plan Template
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The Control Thresholds for this project is a CP or &P of less than ;.D or greater than 2.%. f the
project reaches one of these Control Thresholds a Cost /ariance Correcti5e 'ction Plan is
re6uired. The Project Manager will present the Project &ponsor with options for correcti5e
actions within fi5e business days from when the cost 5ariance is first reported. Within three
business days from when the Project &ponsor selects a correcti5e action option4 the Project
Manager will present the Project &ponsor with a formal Cost /ariance Correcti5e 'ction Plan.
The Cost /ariance Correcti5e 'ction Plan will detail the actions necessary to bring the project
bac7 within budget and the means by which the effecti5eness of the actions in the plan will be
measured. $pon acceptance of the Cost /ariance Correcti5e 'ction Plan it will become a part of
the project plan and the project will be updated to reflect the correcti5e actions.
COST C(ANGE CONTROL PROCESS
Typically the change control process follows the project change control process. f there are
special re6uirements for the cost change control process4 they should be detailed in this section.
The cost change control process will follow the established project change re6uest process.
'ppro5als for project budget?cost changes must be appro5ed by the project sponsor.
PROJECT %'DGET
The budget for this project is detailed below. Costs for this project are presented in 5arious
categories...
-i8ed Costs: H8884888.88
Material Costs H8884888.88
Contractor Costs H8884888.88
Total Project Cost H8884888.88
Management "eser5e H84888.88
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Cost Management Plan Template
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SPONSOR ACCEPTANCE
'ppro5ed by the Project &ponsor:
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JProject &ponsorK
JProject &ponsor TitleK
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