7.4 Control Costs The process of monitoring the status of the project costs and managing changes to the cost baseline. Involves updating the project budget with actuals, comparing performance against baseline and managing any variances and changes Any increase to the authorised budget can only be approved through 4.5 Perform Integrated Change Control It is critical to monitor both the expenditure and the work performed for that expenditure Simplified by project management software Occurs during Monitoring and Controlling Adapted from PMBOK 5th Edition Initiation Planning Execution Close Monitor Control

7.4 Control Costs Project Cost Control includes – Influencing changes to approved cost baseline Acting on and managing changes requests Ensuring that expenditure does not exceed approved funding Understanding the causes of variances Monitoring work performed against expenditure Preventing unapproved changes Taking action to eliminate and manage cost overruns Seeking approval for cost increases Adapted from PMBOK 5th Edition Initiation Planning Execution Close Monitor Control

7.4 Control Costs Inputs to Control Costs Project Management Plan: Cost Baseline Cost Management Plan Project Funding Requirements Work Performance Data Organisational Process Assets Cost management policies and procedures Cost control tools Monitoring and reporting standards Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

7.4 Control Costs Tools and techniques to Control Budget To-Complete Estimates Performance Reviews Earning Value Management Advanced technique Forecasting Percentage Complete Estimates Project Management Software Reserve Analysis Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

7.4 Control Costs Earned Value Management Common and standard method of project performance measurement in the United States Can be complex to implement and requires high degree of analytical ability Monitors three key dimensions – Planned Value, Earned Value and Actual Cost Considered an “advanced technique” and only found in Australia in organisations with high levels of project management maturity Requires detailed actuals data An awareness of the method is useful Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

40% complete as at 2nd May 7.4 Control Costs 10% complete Percentage Complete Estimates Commonly used in Australia as a simplified and less accurate alternative to Earned Value Management The Project Manager and project team members estimate the percentage complete on activities and this is compared to what had been planned for completion at that stage Less accurate as uses estimates based on judgement rather than detailed figures Less time consuming as relies on estimates of actuals rather than detailed capturing of actuals Initiation Planning Execution Close Monitor Control 40% complete as at 2nd May 10% complete as at 10th October Adapted from PMBOK 5th Edition

7.4 Control Costs Forecasting To-Complete Estimates The Project Manager takes input from project team members to estimate the completed cost of the project If this differs from the approved baseline budget then additional funding is required and a new approval should be sought Typically based on actual costs incurred for work completed to date, plus and an estimate to complete for the remaining work To-Complete Estimates Used to determine improvement in productivity required to recover the project cost and bring it back to baseline An “advanced technique” Adapted from PMBOK 5th Edition

7.4 Control Costs Performance Reviews More common but less accurate than To-Complete estimation technique Compares cost performance during the project and estimates funds needed to complete the work Variance Analysis – compares actual time and cost performance against expected performance Trend Analysis – determines if performance is improving or deteriorating Earned value performance – compares baseline plan to actual cost and schedule performance Adapted from PMBOK 5th Edition

7.4 Control Costs Outputs of this process include – Work Performance Measurements Included in status reports which are sent to the Project Sponsor and other stakeholders - causes of variance, corrective action etc Project Budget Forecasts Change Requests Cost Management Plan Updates Cost Baseline Updates Project Document Updates Changes to the Risk Register Changes to Cost Estimates Changes to Project Schedule Organisational Process Asset Updates Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition