BSBPMG533

Manage
project cost
Determine
project costs

•1.1 Determine resource

requirements for
individual tasks identified
in the work breakdown
structure, with input
from stakeholders and
guidance from others
A tool used within project
management that aims to
capture the project tasks in a
visual, organised manner

What is a
A decomposition of your work
project into smaller
components breakdown
structure?

It organises your project into

smaller,
more manageable sections.
 • You will need to determine the
resource requirements for each
of the tasks within your WBS
• The resources that you require
may vary
Resource • Resource requirements may
requirements include:
oequipment and facilities
ofees and charges
ohuman resources
omaterials and services
ostatutory costs.
 Guidance from others
• When determining the resource
requirements for your individual
project tasks, you may need the
input from the stakeholders and/or
the guidance from others
• Others may include:
oprogram manager
oproject specialists
orelevant project authority
osubject matter experts
oteam members.
Determine
project costs

•1.2 Estimate project

costs to enable project
budget to be prepared
within agreed
tolerances
 Estimating project costs
You can never know the true cost of a project until it is
completed

You should try to estimate the costs involved

Project costs are estimated considering:

• contingencies to allow for identified risks and uncertainty

• degree of accuracy required (tolerance levels)
• information available at the time
• organisational requirements, for example overhead and profit
margin
• work breakdown structure.
There are many estimate
techniques, including:

Ballpark estimation

Budget estimation

Definitive estimation

Estimation
Three-point estimation
techniques
Historical project estimation

Resource cost rates estimation

software.
 Cost estimating rules
Consider the following general cost estimating
Consider
rules:

Make Make sure the process is understood

Ensure that the project environment is included

Ensure
within the planning stage
Have the appropriate staff available for each
Have
task
Consider the parts of the project that your
Consider
estimate applies to
Have a contingency amount to allow
Have
for uncertain costs.
Determine
project costs

•1.3 Develop a project

budget
What is a project budget?

• Key element of your project proposal

• Essential tool used by different people involved
• Detailed estimate of costs required to complete
tasks
• Amount to spend without having to ask for more
• Should specify the direct and indirect costs.
 Direct and indirect costs
Direct costs Indirect costs
 Labour/human  Office expenses, such
resources as:
 Raw materials o equipment
 Equipment o rent
 Travel and training o telephone
costs o internet
 Software licences o insurance.
 Consultant fees.
Developing a project budget
Start by identifying project costs

Be realistic

Look back at previous projects to help

Once project costs are identified, identify possible risks

Assign a percentage to each risk reflecting how they may affect

overall project.
Determine
project costs
•1.4 Develop a cost-
management plan,
within delegated
authority, to ensure
clarity of understanding
and ongoing
management of project
finances
 What is a cost management plan?
• Defines how project costs will be managed
• Identifies who is responsible for managing costs
• Describes how project costs will be measured
• Outlines who has the authority to approve any
changes to the project budget and who you need
to report any findings to
• Can allow you to predict the
expenditure of your project and
reduce the chance of going over budget.
 Developing a cost management
plan
Can be formal or informal

Development of cost management plan may depend on size and scope of

project

Steps may include:

identifying tasks listing the creating a stating the

that produce materials needed timeline for your metrics used to
costs for your project project measure costs.
 Be conducted
Delegated authority
routinely or as
means that activities
changing
will:
circumstances dictate

Involve consultation
Be done
independently within
with other project Delegated
members, teams and
broad guidance
internal stakeholders
authority

Take into account

internal
Involve taking a lead
organisational
role in a team where
change and external
required
environmental
change.
 Management of project
finances
Your cost management plan will assist in the
ongoing management of project finances

Finances should be managed throughout

the project’s life cycle

Consider the wide range of cost

management methods

Involve other team members or

stakeholders if necessary.
 Monitor and
control project
costs

•2.1 Implement agreed

financial-management
processes and
procedures to monitor
actual expenditure
against budget
Monitoring actual expenditure
The actual expenditure of your project will need to
be monitored against your budget

This will allow you to verify that your expenditures

are in accordance with your project plan and to
address any deviations

This can be done by implementing the agreed

financial management processes and procedures.
Financial management processes
and procedures
• Help to guide a project
• Outline how money is used and managed
• May include:
oapproval processes
ocommunication and reporting processes
ofinancial authorisations and delegations
oinvoice procedures
oorganisational chart of accounts links.
• Should be agreed upon.
 Before starting
Before starting the monitoring process, determine:

What item(s) need to be monitored?

Who is responsible for this?

How will the monitoring be done?

What should you look for?

What date will the monitoring start?

What is the proposed end date?

 Monitor and
control project
costs

•2.2 Select and use cost-

analysis methods and
tools to identify cost
variations and evaluate
alternative actions
 Cost-analysis methods and tools

The original detailed cost estimate baseline is your project budget

The specific items within your cost-analysis are the cost elements

When choosing cost-analysis methods and tools for your project, you
need to have outlined the estimated total cost and the budgeted
cost of your project.
 Evaluating alternative
actions
Will depend on nature of project and its
objectives
In order to gain a more informed status as to
what your alternatives may be, you should
place your evaluations incrementally along
your critical path schedule

When using cost-analysis methods or tools

along your project’s critical path schedule,
you may need to engage qualified experts or
supervisors.
 Further analysis

Looks into any deviations in more detail

For example:
• low productivity – caused by lack of specific
resources or insufficient training
• high costs of resources – caused by costs of
resources or low project productivity
• an increase in labour may indicate overtime rates
and higher than expected payments
• it may be caused by unscheduled work.
 Monitor and
control project
costs

•2.3 Implement and

monitor agreed actions
to maintain financial
objectives
 Agreed actions
May include reference to new laws, regulations or
standards

May also include actual or potential problems

For example, you may be required to make changes to

the existing time frames in order for the project tasks
to be completed by a specific time
Your agreed actions may include monitoring
the existing accounting management areas.
 • Be described clearly
Be

• Include all the relevant limitations (e.g.

Include timescales and deliverables)

• Outline which team member is

Outline responsible Agreed
actions
Be
• Be documented correctly should

• Be communicated to all team members

Be

• Be measurable.
Be
 Implementing these actions
• The process of applying these actions involves
implementing, monitoring and evaluating them
• The implementation stage relies on the actions
being challenging, yet achievable
• Time that is available to plan, monitor, report
and evaluate should be included
• What does the monitoring process involve?
How will the project team manage the
progress and resource usage? These answers
should be detailed within any agreed action.
 Monitor and
control project
costs

•2.4 Provide accurate

and timely financial
reports
 Financial reports
Details the
Communicates the General function is
budget, time
essential to give account of
frame and
information the project
performance

Format of reports
Analytical
will depend on Formal or informal
document
organisation

A financial report should be

designed
in a way that allows the reader to
scan through it quickly.
 Sections of a financial report
Terms of reference
Summary of project systems
Investigation reports
Presentation of alternatives
Suggested remedy
Cost/benefit analysis
Results and conclusions
Recommendations
Attachments.
 Complete cost-
management
processes

•3.1 Conduct
appropriate
activities to signify
financial
completion
 Financial completion
Financial
Allocations and
completion may Final payments
distributions
include:

Organisational
Project accounts
Financial reports project accounting
finalisation
procedures

Variations
statement.
 Appropriate activities
• In order to signify the financial completion within your
project, you will need to conduct the appropriate
activities
• For example:
o acquiring the necessary signature at various stages
within the project life cycle
o gaining appropriate formal approval
o acknowledging that a project
deliverable has been completed,
reviewed and accepted.
 Complete cost-
management
processes
•3.2 Review project
outcomes using
available records to
determine
effectiveness of
project cost
management
 Reviewing project
outcomes
• In terms of cost-management, project
outcomes would be to what extent the
budget was effective
• Assess key measurements
• Review may include evaluations of:
o agreed major milestones
o change of key personnel and
contingencies
o delivery of major deliverables
o finalisation of project
o variations.
 Estimated vs. actual costs

In order to determine whether the

project costs were managed effectively
ask yourself:
• Were the estimated costs roughly accurate?
• What was the total cost overall?
• Did the individual elements of the project meet cost
expectations?
• Did any contingencies occur?
 Records
• Could use available records to review
outcomes
• These records may include:
budgets and cash flows
cost-management plans and lessons
learned
invoice and payment summaries
lists of potential costs and quotations
reports to relevant stakeholders.
• Determines how effective your cost
management was.
 Complete cost-
management
processes

•3.3 Review cost-

management issues
and document
improvements
Essential part of project
management

Level of detail will depend on

project/organisation

Any issues, their outcomes and Reviewing

solutions need to be communicated cost
management
Any cost management issues may issues
include changes to scope, schedule,
quality, budget or functionality.
 Remember
Be Be accurate

Don’t bring Don’t bring personalities into the reviewing process

Keep Keep detail's objective

Focus Focus of outcomes or changes

Look Look at positives as well as negatives

Don’t be Don’t be vague – give examples wherever necessary

Look Look closely at-risk identification

Learn from any mistakes – suggest future
Learn
improvements.
 Documenting improvements

You may base your future improvements on:

• suggestions from the project team and management

• reports of costs to budget and time frames
• stakeholder satisfaction surveys
• reports on quality, efficiency and performance.

May depend on the organisational procedures

May need to be included within the project

finalisation documentation.
Summative
Assessments
Summative assessments
consist of:
• Skills Activity
• Knowledge Activity
• Performance Activity.

Your assessor will provide you

with further guidance on how
and where to complete these
assessments.