Plan Cost Management

1. Plan Cost Management

This process established the policies, procedures and documentation for planning, managing, expending and controlling project costs. The key benefit of this process is that it provides Guidance and Direction on how the project costs will be managed throughout the project.

The inputs, tools and techniques, and outputs of this process are described below.

1.1 Plan Cost Management: Input Phase
 This process requires the following inputs:

1.1.1 Project Management Plan
The following elements of the Project Management Plan are used:

1. Scope Baseline
2. Schedule Baseline
3. Cost, Risk and Communications Management Plan

1.1.2 Project Charter
This  provides the summary budget from which detailed project cost are developed, as well as project approval requirement (particularly those dealing with project constrains).

1.1.3 Enterprise Environmental Factors
These include the organizational culture and structure, market conditions, currency ex-charge rates, commercial information such as cost rate information and published seller list prices.

1.1.4 Organizational Process Assets
These include financial control procedures, historical information and lessons learned from previous projects, as well as, cost estimating and budgeting-related policies, procedures and guidelines.

1.2 Plan Cost Management: Tools and Technique
There are three tools and techniques that can be used

1.2.1 Experts Judgement
This can involve any member of the project management plan may involve choosing strategic options to fund the project such as:

1. Self funding
2. Funding with equity
3. Funding with Debt

The cost management plan may also details ways to finance project resources such as making, purchasing, renting or leasing. These decisions, like other financial decisions affecting the project, may affect project schedule and/or risk.

Organizational policies and procedures may influence which financial techniques are employed these decisions. Technique may include (but are not limited to): payback period, return on investment, internal rate of return, discounted cash flow, and net present value.

1.2.2 Meetings

These involve people who are responsible for cost management including the project manager, the project sponsors, selected project team members, selected stakeholders, anyone with responsibility for any of the cost management process, and others as needed.

Collective decision making is very important area of project management that the PMBOK (by PMI) does not go into any detail about which can make or break this part of the project. Almost all of the processes that for part of the project time management will involve meetings between the project manager, the team and others stakeholders in order to make decisions about the activity definitions and associated estimates. How well these meetings are conducted will have a major impact on how smoothly the project runs. 

1.3     Plan Cost Management:Outputs
This process will create the following output:

1.3.1  Cost Management Plan
The Cost Management Plan clearly defines how the costs on a project will be managed throughout the project's life cycle. It sets the format and standards by which the project costs are measured, reported and controlled.

This plan identifies who is responsible for managing costs and who has the authority to approve changes to the project or its budget. It also specifies how cost performance is quantitatively measured

and details reports formats, frequency and to whom they are presented.
The Work Breakdown Structures (W.B.S) is the basis for the cost management plan because the costs are totaled or rolled up from the costs for the individual work packages in the W.B.S.