• There seems to be another hen and egg problem in the PMBOK®: On the one hand the process Schedule Control and the 'brother process' Cost Control require Performance Reports as input. And these Performance Reports are generated by the process Performance Reporting. One the other hand the process  Performance Reporting requires Performance Measurements as input. And these Performance Measurements are generated by the processes Schedule Control and Cost Control. We can't solve this loop. We wish we could assume for the moment, that the main process Direct & Manage Project Execution (which covers the (sub) process Performance Reporting) and the processes Monitor & Control Project Work and Integrated Change Control (which covers the (sub) processes Schedule Control and Cost Control) are a highly interacting parallel processes. But a final version of the Project Management Body of Knowledge should no longer contain such kind of loops.

• The target of controlling is not to avoid changes, the target is to avoid uncontrolled changes!

(4.3) Steuerung der Kosten

(4.3.1) Process Input

... generated by predecessor processes

(4.3.2) Process Definition

Cost Control is the process for "influencing the factors that create cost variances and controlling changes to the project budget". (comp. PMBOK3, p. 157). Like other controlling processes the process of project control therefore includes such tasks as handling influencing factors, managing actual changes, detecting wished und unwished changes by comparing the reported real values with the approved cost base line and determining corrective actions (comp. PMBOK3, p. 171).

The subject Cost operates on the base of other cost concerning concepts

(4.3.3) Tools and Techniques

PMBOK Mentioned Methods

  • Cost change control system is the set of procedures and rules by which changes of the cost baseline can methodically be introduced into the project (comp. PMBOK3, p. 171).
  • Performance measurement analysis is a method for comparing the reported reality and the (pre)defined cost baseline. For being able to do that one often uses the Earned Value Technique (comp. PMBOK3, pp. 172f):
    • Planned Value "[...] is the budgeted cost for the work scheduled to be completed on an activity or WBS component up to a given point of time". (If an activity should totally cost X and the work grows linearly over  the planned time than the PV for the half of the working time is 50% of X).
    • Earned Value (EV) "[...] is the budgeted amount for the work actually completed on the schedule activity or WBS component during a given time period" (The maximally earnable value of an activity is its total cost. If an activity has been fullfilled for 25% the earned value is 25% of the earnable value).
    • Actual Cost (AC) "[...] is the total cost incurred in accomplishing work on the on the schedule activity or WBS component during a given time period".
    • Cost Variance (CV) "[...] is earned value minus actual cost (EV - AC). Hence, if CV is positive you have won, if it's negative  you've lost money. CV at the end of the project is "budget at completion (BAC)" minus really total costs.
    • Schedule Variance (SV) is similar CV, but refers to planned values: SV = EV - PV.
    • Cost Performance Index (CPI) is defined as CPI = EV/AC: "A CPI value less than 1.0 indicates a cost overrun of the estimates. A CPI value greater than 1.0 indicates a underrun of the estimates." Note: CPI is also known as "cost-efficiency indicator".
    • Cumulative CPI (CPIC) is "the sum of periodic earned values (EVC) devided by the sum of the individual actual costs (ACC)" CPIC=EVC/ACC.
    • Schedule Performance Index (SPI) is defined as SPI = EV/PV.
  • Forecasting uses techniques for determining new cost values on the basis of the made experiences during the project. Especially if one has a CPI indicating a cost overrun of the estimates one might ask what the results will be if this observation will be taken as base for the future. Here one uses the following concepts:
    • Estimate to complete (ETC) are the necessary costs to complete the activity / WBS unit (comp. PMBOK3, pp. 174ff). This value might be ...
      • ... newly estimated
      • ... computed on the base of atypical variances by accumulating the really earned values: ETC = (BAC - EVC)
      • ... computed on the base of typical variances by accumulating the really earned values and weighting the result with the observed cumulative cost performance index ETC = (BAC - EVC)/CPIC. This means: if you have overrun the estimates in the past you will probably do it in future too. And that should be respected by the estimate to complete
    • Estimate at completion (EAC)  computes the newly estimated total costs by adding the actually already spent costs and the newly estimated costs to complete (comp. PMBOK3, pp. 174ff). With respect to the three possibilities to get ETCs you have three methods to get EAC:
      • "EAC using a new estimate" (EAC = ACC + ETC)
      • "EAC using remaining budget" (EAC = ACC + (BAC - EVC)): add the actually cumulated cost and the estimate to complete on the base of atypical variances, assuming that the cost overruns won't happen again.
      • "EAC using CPIC" (EAC = ACC + ((BAC - EVC)/CPIC)): add the actual cumulated cost and the estimate to complete on the base of typical variances, assuming that the cost overruns will happen again and should be respected by weighting the values by the Cost Performance Index 
    • Variance at completion (VAC) "[...] is the difference between the budget at completion (BAC) and estimate at completion (EAC) (comp. CROSSWIND7, pp. 274ff)
  • Project performance reviews use performance measurement analysis and forecasts to "[...] compare cost performance over time, schedule activities or work packages overrunning and underrunning budget (planned value), milestones due, and milestones met (comp. PMBOK3, pp. 176).
  • Project management software supports necessary collections of data and computations.
  • Variance management follows the cost management plan

(comp. PMBOK3, pp. 171ff)

Open Source Tools

  • NN

(4.3.4) Process Output

  • Updates of the (Activity) Cost Estimate are generated by the offered cost control methods.
  • Updates of the Cost Baseline can be evoked by the given approved change request.
  • Performance Measurements are descriptions of the computed implications of the reported values using CV, SV, CPI, and SPI value for WBS components.
  • Forecast Completion is constituted by the descriptions of the computed consequences into the future using ETC and EAC values.
  • Requested Changes can be evoked by the performance analysis and might concern scope or WBS or activity list and so on,
  • Recommended Corrective Actions are proposals "... to bring exepected future performance of the project in line with the project management plan"
  • Updates of the Organizational Process Assets may be evoked by lessons learned concering the cost observation an analysis
  • Updates of the Project Management Plan are evoked by approved change requests because on the one hand activity list, WBS, schedule base line, cost base line and so on "[...] are components of the project management plan" and on the other hand approved change requests change these documents.

(comp. PMBOK3, pp. 177f)

(4.3.5) Output Using Successor Processes

Successors using the initially generated output as own input(1):

Processes using the updates as input(2):

  1. For details see FAQ::Q001:1
  2. For details see FAQ::Q001:2