This article contains most of the important information you need to know about Plan Cost management process in order to answer questions related to this topic in the PMP Exam, I recommend you review this type of articles 1 week before your exam date, all information mentioned are based on PMBOK Guide 6th edition and PMP Exam Prep 9th edition for Rita Maclhy’s, ITTO refers to Inputs, Tools & Techniques and outputs.
This process is a part of Planning Process group and Cost Management Knowledge Area with the following ITTO’s
- Project Management Plan ( Schedule and Risk Management plans )
- Project Charter
- Organizational Process Assets
- Enterprise Environmental Factors
Tools & Techniques:
- Expert Judgment
- Data Analysis
- Cost Management Plan
- This process defines how you are going to plan, manage and control costs.
- It defines how the project costs will be estimated, budgeted, managed, monitored and controlled.
- Cost management planning efforts occurs early in project planning and sets the framework for each of the cost management processes.
- Funding a project can be through Self Fund, Funding with equity or funding with debits.
- Cost management plan is the only output of this process; it can be called budget plan or budget management plan. It is about thinking in advance about how you will manage costs , it may include
- Units of measure
- Funding decisions.
- Level of accuracy.
- Level of precision
- Cost change control procedures
- Cost thresholds
- Methods of documenting costs.
- Rules of performance measurement .
- Roles and responsibilities of cost activities.
- Organizational procedure links.
- Cost thresholds: the amount of variation allowed before you need to take action.
- Discounted Cash flow: A technique to estimate the attractiveness of an investment by predicting how much money will be received in the future.
- Life Cycle Costing : Looking at costs over the entire life of the product, not just the cost of the project to create the product.
- Value analysis: referred as value engineering , its focus is to find a less costly way to do the same work while maintaining the same scope.
- Cost Risk , It involves the cost related risk .