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Project Management Cost Management

When you are in the midst of the cut and thrust of the project lifecycle project management cost management can and does take a backseat to the actual work of getting the project delivered. However with Organisations becoming much more cost conscious, overlooking the project budget is no longer an option.

Project management cost management tends to comprise of a number of figures which you need to scrutinise each week. These are: Actuals, Forecast, Opex and Capex.

More detail is given on each of these figures below. However the way that project cost controls are implemented, is by "monetizing" your project plan. This is done by the following calculation:

Resource x Assigned Hourly Rate x Task Duration % = Cost

This is automatically done for your entire plan which not only helps in estimating project costs, but also in determining your project budget. Basically every change you make to your plan, whether resource type, quantity of resources, task durations or additional tasks will be, on a weekly basis, reflected in the figures below. It is on these which you report upon in your weekly project management report.

1.0 Actuals

This is the amount which has been actually charged to your project cost code. It consists of all resource costs, which is taken from their submitted weekly timesheet where they allocate their hours to different projects depending on what they have been working on that week, as well as items bought ie hardware.

2.0 Forecast

The PMO (Project Management Office) will each week run a forecast on your project. This is the Actuals figure plus the amount your project is forecast to spend from that week to the end of the project. Again this is all determined from your project plan and depending on the way the PMO works, can include all tasks not marked as complete even if they are in the past.

This figure of course hugely important as it gives everyone a clear indication of whether your project is on track to be delivered within the project budget set. It also demonstrates whether even if over your allocated budget you will remain within the budget tolerance set within your project initiation document or project charter.

If not then you better have some convincing reasons why you're going over budget otherwise you will find yourself writing exception reports, and they are hardly short documents!

3.0 Opex

This is figure utilised by Finance. It won't mean much to you but is one which is reported within your project management report. Basically it includes all the expenditure which can be determined as operating costs. So things such as resourcing costs, maintenance agreement, external consultancies that kind of thing.

4.0 Capex

This again is a figure from Finance and is basically hardware, bought software, basically anything which will have shelf life after your project has launched and which can be utilised by other projects.

The reason why these costs are determined separately is because in many countries, things such as these are allowed to be "written off" for tax purposes. This means the cost can be offset against the Organisations corporation tax bill.

Project Management Cost Management - Tip

Keep a really close eye on your Actuals and Forecast figures. The minute it starts looking "iffy" start scrutinising the resource timesheets. If you see resources booking time to your project who are not even listed in the plan immediately query it. If necessary start bouncing timesheets ie refuse to approve them. Do this and you'll quickly become known as the project manager who is not one to mess with. Before you know it the amount of "strays" who have nothing to book their time to, will stop trying it on, on your project and instead turn their attention elsewhere.

Remember with contractors and when working for consultancies, if you are unable to book your time to any project cost code because there was simply no work for you to do that week, you won't get paid. However this is not your problem. It is up to the team leads to ensure all their resources have enough work to do, not you.

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