HKSM

A section of the overall project or program management plan that explains how project costs will be estimated, organized into budgets, governed, and monitored for control.

Key Points

• Defines methods and tools for cost estimating (e.g., analogous, parametric, bottom-up), including units of measure and precision.
• Describes how the budget and cost baseline will be developed, updated, and how funding will be released.
• Sets cost control rules: thresholds, variance analysis, EVM metrics (e.g., CPI), reporting formats, and frequency.
• Clarifies roles, approvals, and how cost changes integrate with the overall change control process.

Example

On a construction project, the cost management plan states that estimates will be built bottom-up at the work package level, rounded to the nearest $100. The plan sets a 10% variance threshold at the project level and requires monthly EVM reports. Any forecast overrun beyond the threshold triggers a change request to adjust scope, schedule, or budget.

PMP Example Question

Which document explains how project costs will be estimated, budgeted, monitored, and controlled, including variance thresholds and reporting formats?

1. Cost Management Plan
2. Cost Baseline
3. Project Charter
4. Project Funding Requirements

Correct Answer: A — Cost Management Plan

Explanation: The cost management plan defines the processes, tools, metrics, and controls for managing project costs; the cost baseline is a result of planning, not the plan for how to manage it.