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Cost Management Plan

In: Business and Management

Submitted By Winston2474
Words 902
Pages 4
Cost Management Plan

The risk management tool that I would like to discuss is the cost management plan. The definition according to PMBOK is “a document that sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project costs”. The cost management plan is often packaged inside of a larger project management plan which will demonstrate how to effectively control and execute the overall strategy. The cost management plan may be formal or informal, extremely detailed or loosely framed depending on what the project needs. An effective cost management plan can establish the following: 1. Level of accuracy- Activity cost estimates need to be consistent and uniform based on the scope and size of the project. This is where you could add risk contingency categories as well. 2. Units of measure- Each unit shown must be measured and labeled while also easy to locate 3. Organizational links- These can be shown as part of the WBS and its framework. Consistency is key in regards to estimates, budgets, cost controls, and projected overages. Often codes or account numbers are used to link an accounting system to an individual control account (CA). 4. Control thresholds- Variance thresholds for monitoring cost performance can be included and will help determine how much variation is allowed before something needs to be done. PMBOK mentions that thresholds are typically expressed as a percentage of deviations from the baseline plan. 5. Rules of performance measurement- This is where earned value management rules of performance are set. An effective cost management plan could define the WBS and determine when measuring of control accounts will take place, define earned value measurement techniques, and list the EVM equations for calculating the projected estimate at completion and other tracking methods.

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