The Project Cost Management is very important pillar of project management activities, a successful project must have realistic risk management & cost management plans.

The Cost Management consist of set of activities that ensures that the project is completed within the allocated budget and time.

Projects initiated without proper cost management plan are likely to face serious problems as compared to the ones with proper cost management plan. It is the responsibility of project manager to prepare and maintain cost management plan. The project cost management can be defined as:

"Project Cost Management (PCM) is a method that uses technology to measure cost and productivity through the full life cycle of enterprise level projects. PCM encompasses several specific functions of project management including estimating, job controls, field data collection, scheduling, accounting and design. PCM main goal is to complete a project within an approved budget." - Wikipedia (2015, October 10).

A more precise definition can be found in PMBOK Guide stated as:

Project Cost Management is the process of developing an approximation of the monetary resources needed to complete project activities.” - A Guide to the Project Management Body of Knowledge (PMBOK Guide) Fifth Edition.

The PCM can be divided into following set of activities:

Cost Management Planning

This is the initiation of PCM process and consist of procedures and policies needs to be developed and employed in order to effectively manage the cost of project. The step has key role in project cost estimation as is provides the direction and vision how the project cost will be managed during the whole project lifecycle.

Cost management plan is developed using various activities performed during the project management plane for example Project Charter, Work Breakdown Structure (WBS) and communication plan; these documents helps to establish effective cost management plan.

Cost Estimation

This is the process of determining cost of individual activities (work packages) of the project, the cost estimation includes number of resources, raw material, equipment need to perform the actual project work and any other emergency cost.

The various techniques can be employed to estimate cost of the project these tool include but not limited to: Expert Judgement, Analogous Estimation, Parametric Estimation, Bottom-Up Estimation and Three-Point Estimation etc.

Cost Budgeting or Budget Determination

Cost Budgeting is the process to determine overall cost of the project. The cost budgeting is the aggregated cost of all project activities.

Various tools and techniques can be employed to perform cost budgeting, these include: Cost Aggregation, Funding Limit Reconciliation, Historical Relationships, Expert Judgement and Reverse Analysis etc.

Cost control

This is ongoing activity which remains proactive throughout the project lifecycle. Cost Control is basically controlling and monitoring the factors affect the project. In the project lifecycle there are certain risks or factors that may affect project activities which may result in cost overrun; cost control is basically ensuring that the potential cost increase must not exceeded the allocated budget.

Summary

Cost Management is set of processes used to estimate, manage and control the cost of project it consists of activities needs to be performed to plan, manage and control cost of the project in order to dock the project with success. Successfully projects have effective Cost Management measures performed. There are many techniques can be used to estimate the cost of project.

As per my experience over last few years the cost management in software projects is far more different in maintenance projects vs new projects; for maintain projects it’s a bit difficult to do cost management as impact analysis plays major role while in new projects it easier to develop and maintain cost management plan.