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There are three processes involved with PMBOK cost management. The first process is cost estimating. There are various methods for estimating project costs. Analogous estimating utilizes similar projects or activities and makes the estimates for the current project based upon the past results. Parametric modeling involves formula that have been pre-constructed for different project attributes. Bottom-up estimating involves estimating the cost and duration of the smallest activities and then adding them up to create the estimate for the whole of the project. Lastly, computerized tools can provide great assistance in estimating cost in projects.
The second process involved with PMBOK cost management strategies is cost budgeting. The project manager relies upon the data she has gathered from estimates to set up a realistic project budget. The budget should take into account all stages of the project life cycle.
The third and final process is cost control. Savvy project managers will carefully monitor the cost of their projects. This monitoring will include watching to see where actual cost has varied from estimated cost. The monitoring will also ensure that if the actual cost is deviating too far from the estimated or budgeted cost, that the project manager can effect change to get project spending back on track. Finally, cost control involves informing the relevant stakeholders of the cost discrepancies when the actual cost varies too much from the budgeted cost.
