Over the years I have read many articles on Cost Management, but why is successful cost management such a critical part in effective and successful project delivery?

The ability to manage customer or stakeholder expectations is critical to the success of a project, yet project managers are more often measured against his or her track record of delivering projects on time and within the project budget. So why is project cost management so important, and how do we better manage project cost?

We often view project success as the balancing act between project scope, schedule and budget, yet cost overruns are all too often seen as the main culprit in “failed” projects, those that do not meet the original premise.

When looking at project cost management, there are 3 key drivers. First cab off the rank is developing the project estimate. With the development of project budget following this, with the third, being controlling costs against the agreed budget & scope throughout project execution.

For the project manager or cost manager, the key items and opportunities to influence project cost outcomes include:

• early/front end planning and estimating of project time and costs,
• solid contract drafting and management,
• understanding project risks and impacts,
• strong focus on change and scope management, and
• regular and robust monitoring and reporting.

All these areas provide hold points to review and give opportunity to manage project outcomes.

These cost management opportunities all revolve around the project estimate. It is critical to a projects and project managers success to understand the importance of the cost estimate. The project team’s detailed understanding of the estimate is the foundation for success in project delivery where project time, scope and quality have been accurately allowed for.

Ultimately any change to either time, cost or scope will have an impact on the other two inputs, but effective cost management is a key driver to project success, as scope costs money, and time is money!

Author: Tim Sutton