In the early days of project management, project management was synonymous with scheduling. Project planning meant simply laying out a schedule with very little regard for costs. After all, we know that costs will change (i.e., most likely increase) over the life of the project and that the final cost will never resemble the original budget. Therefore, why worry about cost control?
Recessions and poor economic times have put pressure on the average company to achieve better cost control. Historically, costs were measured on a vertical basis only. This created a problem in that project managers had no knowledge of how many hours were actually being expended in the functional areas to perform the assigned project activities. Standards were very rarely updated and, if they were, it was usually without the project manager’s knowledge.
Today, methodologies for project management mandate horizontal accounting using earned value measurement techniques. This is extremely important, especially if the project manager has the responsibility for profit and loss. Projects are now controlled through a series of charge numbers or cost account codes assigned to all of the work packages in the WBS.
Strategic planning for cost control on projects is a three-phase effort, as shown in Figures below. The three phases are:
The evolution of integrated cost-schedule management. Phase I—Budgetbased planning:
The evolution of integrated cost-schedule management. Phase II—Cost/performance determination.
The evolution of integrated cost-schedule management. Phase III—Updating and reporting.
Good methodologies provide the framework for gathering the information to answer these questions.
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Strategic Planning For Project Management Tutorial
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