Table of Contents
Cost Management Approach..
Measuring Project Costs.
Cost Variance Response Process.
Cost Change Control Process.
Project Cost Estimate and Budget.
Management Reserve $11,600.00 Sponsor Acceptance.
The cost management plan is a document that is used to define how the project cost would be managed throughout the life cycle of the project. Various formats and standards inclusive of the Earned Value Management process are used to measure the project cost, closely monitor and control the project as it progresses and various procedures to report the project cost are described in the project cost plan. In case of the Vehicle Maintenance Facility project, the project manager holds the responsibility for managing and reporting the project cost.
Cost accounts must not be made at a very coarse granularity, this may lead to poor estimates. It should not be done at a very fine granularity as well, because a lot of work will be required to manage cost accounts at a fine granularity. WBS level 4 is ideal for maintaining cost accounts. In the vehicle maintenance facility project cost accounts would be maintained that WBS level 4 and the costs would be tracked. Earned value management calculations will be carried out to assess the performance of the project using cost account. Allocation of resources, activity cost estimates, credit for work etc. will be carried out that this level. Calculation of working man hours will be rounded to the nearest whole hour and prices would be rounded to the nearest dollar. A deviation of +/- 0.1% is recorded as a cautionary status and coded in yellow color. A deviation of +/- 0.2 % recorded and allowed stage encoded in in red color.
The primary measure used for managing the cost are taken from earned value management. These are
Cost Performance Index,
Schedule Performance Index,
Budget At Completion,
Budget Cost for Work Scheduled,
Budget Cost for Work Performed and
Actual Cost for Work Performed.
An EVM helps in monitoring and controlling the project closely and is very useful in measuring the project performance, in terms of the project cost. Additionally, it helps to compare between the work performed and the work planned. The budget at completion, budget at cost for work scheduled, budget at cost for work performed, actual cost for work performed can be used to calculate the Estimate At Completion (BAC), which would be the total estimated cost as well as time to completion.
Project status meeting should be conducted periodically from time to time during which the project manager is expected to report the project cost performance. Additionally, in the case of any variation from the cost baseline that goes about the tolerance limits specified, the variation must be brought to the knowledge of the project board immediately and the project manager should come up with corrective measures within 5 business days from the detection of the variation.
The project manager also should review the project cost performance based on earned value and submit an EVM report during every project status meeting. Changes for setting the project on track must be communicated to the project stakeholders. Subsequently, a formal change request must be raised and approval must be sought. The change request is approved the change approval must be recorded and the change can be implemented to bring project back on track within budget.
The Vehicle Maintenance Facility project cost will be reported in the monthly Project Status Report under the section label “Cost Management”. Various EVM metrics will be presented in this section and the threshold for variances, variances if found and the corrective actions will be reported as a part of the status report. In case of the Vehicle Maintenance Facility project, specifying variance for the corrective action in the status report does not trigger a change request automatically. The for the project manager should ensure Formal change requests will be raised separately to cover cost overrun. The status report is merely a documentation of the cost overrun and the suggested corrective measure.
The Control Thresholds, the cause for deviation, the suggested corrective actions, any scope deviation etc. must be presented as a Change Request document. Once these change requests are raised a formal change approval will be issued. Only after the formal change approval is obtained from the project sponsor, the corrective action can be implemented. Both the Change Request as well as Change Approval are filed. The approved corrective actions are implemented to bring the project within budget.
The Vehicle Maintenance Facility project is carried out on basis of a Fixed Scope-Fixed Price Contract. The costs involved in the Vehicle Maintenance Facility project are listed below:
Fixed Costs: $607,226.00
Material Costs: $305,100.00
Contractor Costs: $250,000.00
Total Project Cost Baseline: $1,162,326.00
Management Reserve: $11,600.00
Submitted by the Project Manager:
Student Name, Project Manager, Vehicle Maintenance Facility Project
Approved by the Project Sponsor:
Project Sponsor, Vehicle Maintenance Facility Project
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