Gain a Working Knowledge of Project Cost Management

Explore cost management across the project life cycle, from concept to close, with high level estimates, approvals, value, benefits, cash flow, cost control, and managing scope, schedule, and budget changes.

Differentiate cost from price: cost is the resources to produce, price is set to secure markup and profit in project cost management and contracts.

Explore lump-sum (fixed price) versus cost-plus contracts, showing how changes in costs affect price and profit margins, and the buyer-seller risk in each structure.

Identify the difference between direct costs and indirect costs using a glass whiteboard example, recognizing materials and labor as direct costs and overheads as indirect costs to inform pricing.

Compare expenses and revenue in projects, illustrate a cumulative cost curve over time, and show how upfront funding and staggered revenue sustain work.

Assess profit by subtracting expenses from revenue at project end, where positive results indicate profit and negative results indicate loss.

Learn how a project earns a return on its initial investment by weighing costs, value, and risks against hurdle rates, opportunity costs, and the internal rate of return.

Apply life cycle costing to capture post-project expenses like maintenance, running costs, and insurance over an asset’s useful life. Use net present value to evaluate long-term costs and value.

Understand assets versus liabilities in project cost management, noting how assets create value while liabilities incur maintenance and running costs, with residual value guiding disposal decisions.

Explore depreciation through motor vehicle examples, showing how asset value declines over time. Learn straight-line and diminishing value methods and how depreciation affects balance sheets and procurement choices.

Compare cash and accrual accounting to understand when to recognize expenses and liabilities, including invoices, payment timing, and jurisdictional reporting for project cost management.

Explore contingency concepts in project cost management, identifying financial risks and setting risk-based contingency funds to protect budgets against potential negative events.

Understand planned costs, actual costs, and committed costs in project cost management, including contracts and cash-based versus accrual accounting, and how they shape cost variances.

Explore how actual costs compare to planned budgets, define variance, and identify over budget and under budget scenarios, including the role of committed costs.

The lecture clarifies the difference between cost and budget in project management, showing how cost measures total spending while budget maps the time-based money exchange to a schedule.

Explore capital expenditure and operational expenses, explaining how depreciation and taxation affect costs across multiple financial years, with assets like equipment, vehicles, and buildings.

Learn how sunk costs, unrecoverable expenses, bias project decisions through the sunk cost fallacy, with examples from deposits and long-running projects.

Explore taxation in project cost management, including income tax, GST, capital gains tax, payroll tax, and fringe benefits tax.

Explore how we improve project cost estimates from imprecise beginnings to greater accuracy through effort, yielding plus/minus ranges and guiding confident decisions with cost management insights.

Explore how planning horizon, available historical data, estimator skills, project duration, and environmental factors shape cost estimates, and why the estimator's identity matters for accuracy.

Explore top down estimates as a cost management tool, using high level project structure and analogus estimation to project costs, then roll estimates down and allocate a fixed budget.

Expand the work breakdown structure and interrogate tasks at a granular level for bottom-up cost estimates, then roll up to a total project estimate.

Apply the three-point estimation technique to project cost management (and time management) by using optimistic, most likely, and pessimistic estimates to produce a more justifiable, clear cost range.

Apply a risk-based contingency guided by the three-point estimation to reflect risk levels in each activity, preventing excessive budgets and discretionary spending.

Learn how traditional budgeting ties the budget to the prior year's costs through time-based allocations, and why this method often misaligns funding in projects.

Identify all tasks and costs for a period using zero-based budgeting, then budget from that base. Track cost increases during project phases to ensure funding matches actual needs.

Develop a project budget by creating an initial approval budget, linking costs to a schedule, tracking estimates against actual costs, and analyzing variances to ensure cash flow.

Set clear payment points to avoid project disputes by defining when invoices are issued—milestones or time-based frequency—and ensuring contract parity between client and vendor.

Cash flow means the money available at a point in time, balancing cash in bank against expenditures, with projects aiming to keep the green line above the red.

Establish a baseline budget to measure cost performance by comparing actual costs with the approved baseline, revealing variances for cost management and client communication. Update the baseline when scope changes.

Secure approvals to control budget, validate requirements, ensure value for money, align procurements with scope, and monitor variances against the baseline throughout the project.

Set and monitor cost intervals and evaluation frequencies to detect variances between planned and actual costs, enabling early corrective actions and alignment with organizational standards.

Establish a strong cost information flow by collecting invoice data, analyzing expenditures, and reporting variances to clients, then adjust forecasts and scope as needed.

Develop and monitor a baseline budget against actual costs, identify variances, and respond proactively by communicating with the client and updating the project management plan.

Define variance thresholds and corresponding actions in the cost management plan, using percent ranges to trigger verbal or written communications. Assign accountability and standardize client updates for timely, documented approvals.

Learn how the S-curve, a cumulative cost curve, tracks project costs over time by comparing planned budget and actual costs to identify variances and schedule slippage.

Identify and report variances between actual costs and plans, determine the degree of variance, and report early to the right stakeholders through the status report and cost management plans.

Forecast cost management by comparing plan costs to actual costs, and identify variances across the planning horizon. Develop corrective actions to adjust future forecasts and enable proactive project management.

Identify, analyze, and manage changes that affect project cost and schedule by forecasting potential changes, assessing impacts, and obtaining approved changes to update the baseline.

Understand why costs overrun or you are ahead of schedule and apply corrective actions, such as reducing scope, cutting costs, revising estimates, or extending duration.

Review cost performance by comparing budgeted costs with actuals, identify variances and their causes, and prepare a clear handover for the client.

Evaluate the cost management process to assess estimation accuracy, budgeting, scheduling, approvals, and procurement. Use findings to drive continuous improvement and better value for money in future projects.

Discover how to close a project account by verifying scope, reporting under budget, and choosing handover timing, reserves, or two sets of books for future cost management.

this lecture emphasizes building robust cost management through accurate estimates, approvals, and procurement, while fostering a no-blame culture to capture and share lessons learned that cut future costs.