PROJECT COST MANAGEMENT PLAN TEMPLATE This Project Cost Management Template is free for you to copy and

use on your project and within your organization. We hope that you find this template useful and welcome your comments. Public distribution of this document is only permitted from the Project Management Docs official website at: www.ProjectManagementDocs.com

COST MANAGEMENT PLAN

<PROJECT NAME>

COMPANY NAME STREET ADDRESS CITY, STATE ZIP CODE

DATE

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

TA%LE O& CONTENTS

ntroduction......................................................................................................................................! Cost Management "pproach............................................................................................................! Measuring Project Costs..................................................................................................................# $eporting %ormat.............................................................................................................................& Cost 'ariance $esponse Process.....................................................................................................& Cost Change Control Process...........................................................................................................( Project )udget..................................................................................................................................(

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

INTROD'CTION
The Cost Management Plan clearly defines how the costs on a project will be managed throughout the project+s lifecycle. t sets the format and standards by which the project costs are measured, reported and controlled. The Cost Management Plan: dentifies who is responsible for managing costs dentifies who has the authority to appro-e changes to the project or its budget .ow cost performance is /uantitati-ely measured and reported upon $eport formats, fre/uency and to whom they are presented The Project Manager will be responsible for managing and reporting on the project+s cost throughout the duration of the project. During the monthly project status meeting, the Project Manager will meet with management to present and re-iew the project+s cost performance for the preceding month. Performance will be measured using earned -alue. The Project Manager is responsible for accounting for cost de-iations and presenting the Project 0ponsor with options for getting the project bac1 on budget. The Project 0ponsor has the authority to ma1e changes to the project to bring it bac1 within budget.

COST MANAGEMENT APPROAC(

This section you e2plain your approach to cost management for your project. We chose to create Cost "ccounts at the fourth le-el of the W)0 as an e2ample since many project management offices don+t ha-e a Project Management nformation 0ystem. f you are using a Project Management nformation 0ystem then you can, and should, manage costs down to the wor1 pac1age le-el. %or those who don+t ha-e a Project Management nformation 0ystem you+ll want to determine which le-el of the W)0 you can most effecti-ely manage the project+s costs from. The further down in the W)0 you go, the more detailed your cost management is. .owe-er, you should balance the granularity at which you want to manage costs against the amount of effort it ta1es to manage at that le-el. The more granular your cost management, the more wor1 is necessary to manage it. Costs for this project will be managed at the fourth le-el of the Wor1 )rea1down 0tructure 3W)04. Control "ccounts 3C"4 will be created at this le-el to trac1 costs. 5arned 'alue calculations for the C"+s will measure and manage the financial performance of the project. "lthough acti-ity cost estimates are detailed in the wor1 pac1ages, the le-el of accuracy for cost management is at the fourth le-el of the W)0. Credit for wor1 will be assigned at the wor1 pac1age le-el. Wor1 started on wor1 pac1ages will grant that wor1 pac1age with (67 credit8 whereas, the remaining (67 is credited upon completion of all wor1 defined in that wor1 pac1age. Costs may be rounded to the nearest dollar and wor1 hours rounded to the nearest whole hour. Cost -ariances of 9:; 6.* in the cost and schedule performance inde2es will change the status of the cost to cautionary8 as such, those -alues will be changed to yellow in the project status reports. Cost -ariances of 9:; 6.! in the cost and schedule performance inde2es will change the status of the cost to an alert stage8 as such, those -alues will be changed to red in the project
!

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

status reports. This will re/uire correcti-e action from the Project Manager in order to bring the cost and:or schedule performance inde2es below the alert le-el. Correcti-e actions will re/uire a project change re/uest and be must appro-ed by the Project 0ponsor before it can become within the scope of the project.

MEAS'RING PROJECT COSTS

This section defines how the project+s costs will be measured. The PM)<= focuses on 5arned 'alue Management for measuring and controlling a project+s costs. 5arned 'alue Management is a broad and powerful tool8 as such, we recommend that all project managers ta1e some formal courses in 5arned 'alue Management. n this section you should detail how you will measure the project costs. What 5arned 'alue measurements will be captured and reported upon. Will you use any tools, such as project management software, to assist in capturing 5arned 'alue metrics> .ow will you forecast future project costs> Will you re-iew cost performance o-er time, across wor1 pac1ages or schedule acti-ities> <ur e2ample in this section measures four 5arned 'alue measurements8 0chedule 'ariance 30'4, Cost 'ariance 3C'4, 0chedule Performance nde2 30P 4 and Cost Performance nde2 3CP 4. %or most typical projects these four measurements can pro-ide enough insight for effecti-e management without o-erburdening the Project Manager with 5arned 'alue calculations and measurements. 0chedule 'ariance 30'4 is a measurement of the schedule performance for a project. t+s calculated by ta1ing the 5arned 'alue 35'4 and subtracting the Planned 'alue 3P'4. 0ince 5' is the actual -alue earned in the project and the P' is the -alue our project plan says we should ha-e earned at this point, when we subtract what we planned from the actual we ha-e a good measurement which tells us if we are ahead or behind the baseline schedule according to our project plan. f 0' is zero, then the project is perfectly on schedule. f 0' is greater than zero, the project is earning more -alue than planned thus it+s ahead of schedule. f 0' is less than zero, the project is earning less -alue than planned thus it+s behind schedule. Cost 'ariance 3C'4 is a measurement of the budget performance for a project. C' is calculated by subtracting "ctual Costs 3"C4 from 5arned 'alue 35'4. "s we already 1now, 5' is the actual -alue earned in the project. "C is the actual costs incurred to date, thus when we subtract what our actual costs from the 5' we ha-e a good measurement which tells us if we are abo-e or below budget. f C' is zero, then the project is perfectly on budget. f C' is greater than zero, the project is earning more -alue than planned thus it+s under budget. f C' is less than zero, the project is earning less -alue than planned thus it+s o-er budget. 0chedule Performance nde2 30P 4 measures the progress achie-ed against that which was planned. 0P is calculated as 5':P'. f 5' is e/ual to P' the -alue of the 0P is *. f 5' is less than the P' then the -alue is less than *, which means the project is behind schedule. f 5' is greater than the P' the -alue of the 0P is greater than one, which means the project is ahead

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

of schedule. " well performing project should ha-e its 0P as close to * as possible, or maybe e-en a little under *. Cost Performance nde2 3CP 4 measures the -alue of the wor1 completed compared to the actual cost of the wor1 completed. CP is calculated as 5':"C. f CP is e/ual to * the project is perfectly on budget. f the CP is greater than * the project is under budget, if it+s less than * the project is o-er budget. Performance of the project will be measured using 5arned 'alue Management. The following four 5arned 'alue metrics will be used to measure to projects cost performance: 0chedule 'ariance 30'4 Cost 'ariance 3C'4 0chedule Performance nde2 30P 4 Cost Performance nde2 3CP 4 f the 0chedule Performance nde2 or Cost Performance nde2 has a -ariance of between 6.* and 6.! the Project Manager must report the reason for the e2ception. f the 0P or CP has a -ariance of greater than 6.! the Project Manager must report the reason for the e2ception and pro-ide management a detailed correcti-e plan to bring the projects performance bac1 to acceptable le-els. Pe")o"man$e Meas*"e 0chedule Performance nde2 30P 4 Cost Performance nde2 3CP 4 Yello )etween 6.? and 6.@ or )etween *.* and *.! )etween 6.? and 6.@ or )etween *.* and *.! Re+ Aess Than 6.@ or Breater than *.! Aess Than 6.@ or Breater than *.!

REPORTING &ORMAT
$eporting for cost management will be included in the monthly project status report. The Monthly Project 0tatus $eport will include a section labeled, CCost ManagementD. This section will contain the 5arned 'alue Metrics identified in the pre-ious section. "ll cost -ariances outside of the thresholds identified in this Cost Management Plan will be reported on including any correcti-e actions which are planned. Change $e/uests which are triggered based upon project cost o-erruns will be identified and trac1ed 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 ta1en if the project triggers a control threshold. "s a part of the response process the Project Manager typically presents options for correcti-e action to the Project 0ponsor who will then appro-e an appropriate action in order to bring the project bac1 on budget. The Project Manager may propose to increase the budget for the project, reduce scope or /uality, or some other correcti-e action. The Control Thresholds for this project is a CP or 0P of less than 6.@ or greater than *.!. f the project reaches one of these Control Thresholds a Cost 'ariance Correcti-e "ction Plan is
&

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

re/uired. The Project Manager will present the Project 0ponsor with options for correcti-e actions within fi-e business days from when the cost -ariance is first reported. Within three business days from when the Project 0ponsor selects a correcti-e action option, the Project Manager will present the Project 0ponsor with a formal Cost 'ariance Correcti-e "ction Plan. The Cost 'ariance Correcti-e "ction Plan will detail the actions necessary to bring the project bac1 within budget and the means by which the effecti-eness of the actions in the plan will be measured. Epon acceptance of the Cost 'ariance Correcti-e "ction Plan it will become a part of the project plan and the project will be updated to reflect the correcti-e actions.

COST C(ANGE CONTROL PROCESS

Typically the change control process follows the project change control process. f there are special re/uirements for the cost change control process, they should be detailed in this section. The cost change control process will follow the established project change re/uest process. "ppro-als for project budget:cost changes must be appro-ed by the project sponsor.

PROJECT %'DGET
The budget for this project is detailed below. Costs for this project are presented in -arious categories... %i2ed Costs: F222,222.22 Material Costs F222,222.22 Contractor Costs F222,222.22 Total Project Cost F222,222.22 Management $eser-e F2,222.22

Cost Management Plan Template !P"o#e$tManagementDo$s!$om

SPONSOR ACCEPTANCE
"ppro-ed by the Project 0ponsor: GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG HProject 0ponsorI HProject 0ponsor TitleI Date:GGGGGGGGGGGGGGGGGGGG

This free Project Cost Management Plan Template is brought to you by www.ProjectManagementDocs.com