Cost Management Plan Essay

Words: 915
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
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Taking care of the completed project can be costly as well. According to ProjectSmart (a Project Management Consultant in the U.K.) “Maintenance accounts for 50% to 80% of the overall product cost? And while most project managers are fairly good at determining new product features, many struggle at estimating the effort required to support a product once it becomes available. As a result, maintenance projects are inadequately staffed, companies can't respond to customer requests in a timely manner, and products never reach payback”.
It is difficult to imagine a scenario where it is not beneficial to use a cost management plan. During my time as a Real Estate Developer over a ten year period, these plans were critical. The banks were always concerned with expenses and my business plans had to accurately reflect all costs before, during and after a project was completed. Finishing beautiful projects and contributing to a vibrant community was always a high priority but each individual project never got green lit or financed without strict cost projections/estimates that impacted profit. It was too much work and risk taken over a long period of time to not effectively manage these costs. Anyone with a construction background will understand this. One potential downside of drawing up a cost management plan is taking too long to put it together. An inexperienced Project Manager will not know who to consult or how to