Project Cost Control From Pmi.Org By Sam Anderson, Pmp, Cssbb

PMI Virtual Library © 2009 Project Management Institute

Project Cost Control
By Sam Anderson, PMP, CSSBB

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ou are the project manager nearing the end of a item is a part of a project. Electronic items, and the associated relatively large, complicated, and long term project. software, will be even more confusing. For instance, the receipt You are reasonably satisfied with the result—tothe of downloaded software does not have a physical tag to hang best of your knowledge, the project is achieving what it was documentation on, and one controller looks much like any intended to do, within planned schedule and cost goals. You other controller. have diligently kept track of your requisitions, and your You now have many weeks of detailed investigation, at project cost spreadsheet isupdated and current. However, the end of which may well be some difficult actions. Even at this point, you receive a call from the Accounting group if extraneous charges have been found, those charges have to saying that you are radically over budget. The Accountant is go somewhere. In the event that you are in fact over budget, in a state of panic, thinking that some of the blame will fallappropriate management approval must be obtained. Your his or her way. The invoices are piling up, and the targeted credibility will not be particularly high. This is not a good cost is already a distant memory. The only approach available result for a project manager. to you now is to dig through all This result could have of the invoices and determine been avoided. The actions what happened. Thisproves necessary to avoid such a Thought must be given to be a difficult undertaking, scenario must take place the invoices may not always much earlier in the project, to the mechanisms of cost be tied to a purchase order, or preferably at chartering, or control and communication, there may be multiple invoices soon after you are assigned against a single purchase order. as Project Manager. The andwhat control means. You will see charges that you do first action necessary is to not recognize, which you must meet with your Accounting, chase down. You may even Purchasing, and Receiving see charges coming from within the organization, including personnel. These folks may think that you are poaching in their some that involve labor charges associated with startup. Now areas of authority, and maybe resistant to change. You can deal you have weeks of work ahead of you, and the project is in with this by making it clear that you are not seeking operating startup. Time is something that you do not have. authority over their function, but must have some control over In all probability, you are working in a “non-projecticized” your project. Thought must be given to the mechanisms ofenvironment. In this type of environment, the systems and cost control and communication, and what control means. culture often do not adequately support project cost control. First—Officially, the commitment for expenditures is the People are measured, and rewards are based upon, the daily, purchase order; however, the control of cost needs to occur weekly, monthly and annual performance of the enterprise.The at the time that the requisition is issued. This is where your personnel have to deal with your project over and above their spreadsheet starts. This spreadsheet contains the requisition daily work requirements, and will probably do so as quickly number, supplier, amount, whatever supplier contacts you feel as they can. It may be that account numbers specific to your are necessary, runningtotal, amount remaining, and cost index, project were not established because, historically, all projects and it will be updated with the purchase order number, issue are captured in a universal account. Purchase orders may not date, and delivery date. This will take some time to create and be automatically linked to requisitions. If physical goods are keep updated, but it will be a timesaver over...