Cost management plan in project management practices

The purpose of this cost management plan is to determine the methodology by which costs related to corporate projects will be managed. This is necessary to ensure the successful completion of each project within the allocated budget constraints. There are several components of project management costs, as well as many indicators, cost difference considerations, and reporting that this plan will outline.

To successfully complete this project, all key project members and stakeholders must adhere to and work within this cost management plan and the overall project plan it maintains.

Project Scope

The project cost management plan includes many components of internal and external costs. Reference: Costs planning in Agile project management, All indicators and analyses of variance must be applied to these cost components throughout the project life cycle. These components include:


  • Project team resources
  • Recruitment and hiring of additional staff
  • Capital equipment
  • Software
  • Licensing
  • Insurance
  • Training


  • Raw material costs
  • Cost of supplies and materials Reference: Procurement Management Plan in Project Management Practices.
  • Insurance
  • Training

This cost management plan does not include the monthly recurring costs (MRCs) that will be required upon completion of the project.

Roles and responsibilities for cost management

All team members and stakeholders must have a clear understanding of the role they and others play in setting project budgets, allocating funds, authorizing additional funding, and where everyone is responsible. Reference: Roles and stakeholders in project management: Project Manager, Director, Sponsor, Program Director,

Project sponsor

The project sponsor is responsible for approving the project cost management plan. In addition, it is responsible for approving the project budget and is the approving authority for any additional funding that may be needed.

Project manager or Product Owner

The Project Manager or the Product Owner (for Scrum teams) is responsible for the day-to-day management of project funds, for the development of an internal breakdown structure (WBS), which covers all the work to be done by the task force. Authorized to implement the costs of the project funds, if necessary in accordance with the cost management plan and the allocated project budget. He cannot allow the use of additional funding without the prior approval of the Project Sponsor. Responsible for creating metric analysis tools to provide status updates once a month to the Project Sponsor.

Project team

The project team is responsible for the implementation of the assigned work in accordance with the cost management plan. They are also required to assist the project manager in implementing indicator analysis tools to ensure that all project results are implemented within the allocated budget constraints.

External partners

The external partner/contractor is responsible for providing an initial estimate of the project costs, which includes all costs related to the part of the project for which they are employed. In addition, the contractor provides WBS, which includes all and related costs.

Cost management approach

This section outlines the approach that will be used to manage project costs. The level and level of detail may vary for this section depending on the nature of the project and the organization. This section should include paragraphs describing cost planning/estimation, cost tracking, cost reporting/indicators and minimum cost diversion. These paragraphs explain cost management in detail.

Cost planning and evaluation

Once the needs of the project have been identified, the project team will finalize the necessary resources and staff needed for the successful completion of the project. The project manager describes all the tasks and the materials and resources needed for them. Control accounts are created for each element of the project. An estimate will be made based on labor costs and the planned duration of each element of the project. The costs for the individual tasks / elements will then be collected and used to apply for funding for the project. Once the project budget ( is approved, the project manager will compare the budget allocation for each project element against the total budget and adjust the allocations if necessary to comply with the project budget. Once all allocations have been reviewed and approved by the project manager, the project costs will be based. The base value of the project can be changed only with the permission of the Project Sponsor.

Tracking costs

All project team members and contractors will record their project work in the appropriate schedules, using the relevant cost accounts. On the last working day of each month, the project manager will collect all the schedules and calculate the cost of resources.
The project manager will calculate the actual costs for all cost categories and compare these actual costs with the estimated base costs on a monthly basis. These comparisons will be used to generate data for all indicators and status reports, as well as for analysis

Cost indicators and reporting

To measure the effectiveness of the project, several cost capture indicators and a project implementation schedule will be used. The following indicators will be compiled and reported by the project manager:

  • The cost-effectiveness index (CPI) will be reported monthly and is the EV / AC of the project
  • The Graph Performance Index (SPI) will be reported monthly and is the accumulated value (EV) / planned value (PV) of the project
  • The control thresholds for CPI and SPI are:
    • Yellow: within +/- 15% must be reported to the Project Sponsor.
    • Red: more than +/- 20% must be reported to the Project Sponsor. Corrective measures must be taken to return costs to an acceptable level of performance
    • The deviation from the schedule (CV) will be reported monthly and subtracted from the AC value of the project
    • The graph variant (SV) will be reported monthly and calculated by taking the accumulated value (Earned Value, EV) and subtracting the planned value (Planned Value, PV)
  • Create a chart for each of the above indicators. The project manager will present these diagrams to the Project Sponsor at the monthly project status meeting on the 2nd of each month.

Cost control measures

If the project exceeds the thresholds of the Schedule Performance Index or the Cost-Effectiveness Index, corrective measures will be considered and implemented to return the project to an acceptable range of results. The project manager or the Product Owner role in Scrum (Reference: and the team must take into account all control measures that will lead to the adjustment of the project implementation. A detailed analysis of all control measures must be submitted to the Project Sponsor.

The analyzes will consist of:

  • General description of the control measure
  • Required resources
  • Execution timeline
  • Problems or concerns about implementation
  • The expected effect on project implementation
  • All control measures will be reviewed by the Project Sponsor. After approval by the Project Sponsor, the project manager will lead the implementation of the permitted control measure.


All project and management plans must have the approval of the Project Sponsor and Project Manager or Product Owner if the Scrum framework is used for the project development. The signatures of these individuals show their recognition and understanding of the project charter.

The signatures of the people below show an understanding of the purpose and content of this document by those who sign it. By signing this document, you accept this as a formal cost management plan for the building extension project.

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