HKSM

Replace this with term.

Purpose & When to Use

Control Cost keeps project spending on track by comparing actuals to the baseline, forecasting outcomes, and steering corrective actions. Use it throughout the project after the cost baseline is set, with more frequent reviews during high-spend periods or when risks rise.

• Detect and understand cost variances early.
• Forecast Estimate at Completion (EAC) and funding needs.
• Decide and implement corrective or preventive actions.
• Update the cost baseline only through approved change control.
• Provide clear, timely cost performance information to stakeholders.

Mini Flow (How It’s Done)

• Gather Inputs: cost baseline, funding limits, progress data, actual costs, contracts, and prior changes.
• Measure Progress: confirm earned value using verified work completion, not just time elapsed.
• Analyze Performance: review cost variance and cost efficiency (e.g., CV, CPI), trends, and reserve usage.
• Forecast: update EAC and ETC using methods suited to the situation (e.g., CPI-based, bottoms-up for atypical issues).
• Decide Actions: define corrective or preventive steps, assess impacts, and prepare change requests if baseline or funding must change.
• Communicate: issue concise cost reports, update stakeholders on variances, forecasts, and approved changes.
• Implement & Monitor: execute actions, track results, and capture lessons for future cycles.

Quality & Acceptance Checklist

• Progress measurement method is reliable and agreed (supports earned value where used).
• Actuals include accrued and committed costs; data sources are reconciled and timely.
• Variances and trends are calculated correctly and explained with clear drivers.
• Forecast method matches the situation; assumptions and constraints are documented.
• To-complete efficiency (e.g., TCPI) is assessed when targeting BAC or a new EAC.
• Reserves are tracked separately; draws are authorized and logged.
• Funding limits and cash flow are respected; no unapproved overruns exist.
• Contract charges align to delivered work; change orders and claims are reflected.
• Baseline updates occur only after formal approval and are version-controlled.
• Stakeholder reports are timely, clear, and actionable.

Common Mistakes & Exam Traps

• Confusing total budget with the cost baseline; remember management reserve is outside the baseline.
• Using time elapsed as a proxy for progress, causing incorrect earned value and misleading variances.
• Thinking a negative cost variance is good; negative CV indicates overrun.
• Re-baselining to hide variances instead of analyzing root causes and taking action.
• Ignoring committed costs and accruals, which leads to late surprises.
• Picking the wrong EAC method; use CPI-based for persistent performance, bottoms-up for one-off issues, or combine schedule impact if it drives cost.
• Skipping change control when the baseline will be breached; raise a change request when overrun is unavoidable.
• Not updating risks and reserves after cost variances or forecast changes.
• Failing to coordinate with procurement on contract changes that affect cost.

PMP Example Question

Your project’s CPI is 0.85 and trends show the overrun will continue. The sponsor asks you to stay within the current budget. What should you do next?

1. Immediately update the cost baseline to a higher amount.
2. Submit a change request for more funds without further analysis.
3. Analyze cost drivers and propose corrective actions to improve performance before requesting changes.
4. Ignore CPI because schedule is on track.

Correct Answer: C — Analyze cost drivers and propose corrective actions to improve performance before requesting changes.

Explanation: First, investigate variances and try corrective actions. If an overrun remains unavoidable, then follow change control to adjust funding or scope.