Just like any business every project manager’s success hinges on efficient and effective utilisation of resources on every project. This compels project managers to make use of budgeting tools and techniques to accurately estimate project costs and budgets as well as close monitoring of execution to ensure their completion within the allocated budget as well as taking corrective measures when deviations occur during implementation. These tools allow the project manager to track progress and effectively communicate the project status to the project sponsor and key stakeholders who provide the funding and support throughout the project life cycle.
The three basic processes of project cost management central to effective budget success delivery are cost estimating, cost budgeting and cost control. Cost estimate is used to assess the cost of resources necessary to complete scheduled tasks for a project commonly based on a Work Breakdown Structure (WBS). The Cost Estimate is a tool that makes it easier to assess the costs of the resources needed to complete a project. Cost budgeting is clinical tool ideal for assigning cost estimates to budget lines and establishing a baseline for measuring project performance and cost control for controlling changes to the project. It is important to appreciate that project costs and project budgets are distinct. Optimal and effective utilisation of these processes facilitates the development of an effective system that ensures resource costs remain within the approved project budget.
Techniques used to estimate the costs include the parametric budgeting tool, the top down method, the bottom up approach, resource cost rates and computer software tools using statistics and simulations to provide accurate descriptions. The estimates are used as the source data for preparing the cost budget. The cost control tool is important for managing change requests and issues emerging during implementation to ensure the project remains within budget, performance measurement analysis, forecasting, project performance reviews. It is important to appreciate that efficiently managing a project’s finances is an extremely important part of overall project management and a key measure of project success. Risk assessments and assignment are equally important in project budgeting.