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Project Management (a quick tutorial) - Cost Management

Cost Management

Cost management includes the monitoring and control of projects costs.  Costs are allocated, monitored and controlled as required to maintain the project budget.  

The primary cost management activities:

  1. divide your project budget by major activity
  2. sub-divide the activity budget by work phase, work section and work group
  3. add costs to the project schedule with cost thresholds by major activity and work group
  4. communicate the budgets for each major task to the task leaders
  5. monitor cost expenditures against the task budgets
  6. identify potential cost impacts and execute mitigating actions, as required
  7. revise the actual and projected costs on the project schedule
  8. control expenditures as required to meet task budgets

Some projects are budgeted by work hours.  If so, the process is the same, with work apportioned by labor hours.

I  Word to the Wise –

Most companies have established procedures for cost allocation and budgeting.  Follow the budgeting process of your company!  If you do not follow the company process you may be dramatically off in your budgets.

F  Voice of Experience –

If the project does not have a budget, develop one anyway and manage accordingly.  If you don’t have a project accounting system, budget and track labor hours and cost expenditures. 


Include contingency in your budgets.  The size of the contingency will be based on the strength of your scope and your experience with similar projects.  Common contingencies:

  1. Scope contingency (for minor scope changes)
  2. Schedule contingency (the cost impact of time delays)
  3. Design contingency (for changes that occur in the design)
  4. Construction contingency (unknown conditions for items not addressed in construction cost estimates)

Each contingency should be discussed with your client. 

Contingencies can change over the project life cycle.  As the project progresses some contingencies can be revised, and hopefully reduced.


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Construction Management Southeast Kansas

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