Seven Key Components of a Cost Management Plan

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The Cost Management Plan describes the process that will be used to manage the project budget including tracking current expenditures, upcoming expenses, identifying potential budget overruns and evaluating overall project spending against the budget. The components of the Cost Management Plan can include:

• Roles and responsibilities. You can describe different roles and their ability to access the project budget. For example:
  • Who is the budget owner. This is probably the project manager. (The project sponsor owns the money from a business perspective, but the project manager owns it from a budget perspective.)
  • Who can approve expenses? This is important to identify up-front. It is possible that only the project manager can approve project expenses, but in some instances this can be delegated to someone closer to the expense. For instance, if you have contractors working within project teams, it is possible that the team leader will be authorized to approve the timesheets for these contractors.
  • Who can read? The budget numbers may or may not be sensitive information. You should decide who else can have access to the actual expenditures and budget information.
• Frequency. You should describe the timing of budget analysis. On many projects this may be monthly since that is the frequency most General Ledger reports are available. On some projects, the expenses may need to be tracked weekly, even if it is a manual process.
• Feedback. This describes how the budget feedback will be delivered. This is probably going to be automated reports from your financial system or a manual tracking process, or both.
• Budget change review and approval. This is where you define the process required to evaluate and approve proposed budget changes. It defines the authority for accepting and approving changes to the budget. This process does not include approving individual expenses during the project. It applies to changes in the overall project budget. It is possible that the project manager may have some discretion to exceed the budget by a certain percentage, but after that threshold some formal body may need to approve the change.
• Tools. Describe about any budgeting tool that will be used on this project, who will have access to the tool and what various people can do with the tool (read the budget, update numbers, etc.)
• Reports. Comment here on the types and names of reports you are using to manage the budget, who will receive them, the frequency, etc.
• Budget integration. Normally each project keeps an independent budget, but in some instances your master budget is the result of a roll-up of other underlying budgets. It is also possible that your budget could be integrated and rolled up to a higher-level program or portfolio budget.

The Cost Management Plan is not needed for all projects. However, if you have a large project and large budget, you might want to plan ahead for how the budget will be allocated and managed. Think through and complete a Cost Management Plan if it provides value to your project.