The AMA Handbook of Project Management

By Paul C. Dinsmore; Jeannette Cabanis-Brewin | Go to book overview
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CHAPTER 6
Controlling Costs and Schedule
Systems That Really Work
RALPH D. ELLIS, JR., UNIVERSITY OF FLORIDA (RET.)In the design and implementation of a project cost control system, the individual characteristics of the organization performing the project and of the project itself must be considered. However, the following criteria should be considered regardless of the specific situation:
Validity. The information reported must accurately reflect actual versus estimated costs.
Timeliness. The cost data must be reported early enough so that managerial action can be taken if a problem arises.
Cost effectiveness. Collection and reporting of cost data must be done in a way that does not hinder project progress.1

Cost control systems can work if they are set up with these criteria in mind. This chapter covers how to design and implement an effective project cost control system. The examples given are drawn from the construction industry, yet these same principles are applicable to other types of projects.


DEVELOPING A PROJECT COST CONTROL SYSTEM

Establishing a Project Cost Control Baseline

The project cost control baseline is developed from the project cost estimate.2 Initially, during the conceptual phase, the cost estimate exists only as a preliminary or order of magnitude estimate3; as the engineering design progresses, more precise estimates of cost can be developed. A detailed cost estimate,

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