How do you benchmark and compare project costs with industry standards and best practices?

1 What is cost benchmarking?

Cost benchmarking is the process of measuring and comparing your project costs with those of similar projects or organizations in your industry or sector. This process is useful for assessing cost competitiveness and efficiency, as well as identifying areas of improvement and potential savings. It can also help you learn from the best performers and adopt best practices, set realistic and achievable cost targets and budgets, and monitor and evaluate your cost performance and progress.

2 How to find reliable sources for cost benchmarking?

When it comes to cost benchmarking, one of the challenges is finding reliable and relevant sources of data and information. Sources such as industry reports and publications, professional associations and networks, consultants and experts, peer organizations or competitors, and even your own historical or current cost data can provide accurate and meaningful comparisons. These sources can offer cost databases, surveys, or benchmarks for their members or subscribers, as well as the ability to share cost data or experiences with you in order to compare your performance over time or across different projects.

3 How to conduct a cost benchmarking analysis?

Once you have identified and collected the relevant sources for cost benchmarking, a systematic and rigorous analysis is necessary to compare your project costs with those of the benchmarks. This process involves defining the scope and objectives of the project, such as the type, size, and complexity of the projects to compare, the cost categories and metrics to measure, and the goals and outcomes to achieve. You should also select appropriate benchmarks that match your scope and objectives, such as similar projects or organizations in terms of scale, scope, quality, and context. Additionally, you must normalize and adjust the cost data to account for any differences or variations in factors such as currency, inflation, location, time, and quality. After calculating and comparing the cost ratios, variances, and trends between your project costs and the benchmarks, you can analyze and interpret the results to identify gaps, strengths, weaknesses, opportunities, threats for your project costs.

4 How to use the results of your cost benchmarking analysis?

The results of your cost benchmarking analysis can provide you with valuable insights and recommendations for improving your cost management and performance. You should communicate and share the results with your project team, stakeholders, and sponsors, in order to receive feedback and suggestions. Additionally, you should develop and implement action plans to address any gaps, issues, or opportunities identified by the analysis. This could include reducing waste, optimizing resources, improving quality, enhancing efficiency, or innovating solutions. You should also monitor and track the impact of your action plans and strategies, measuring the changes and improvements in your cost performance and competitiveness. Furthermore, you should review and update your cost benchmarking analysis periodically, repeating the process as needed to ensure continuous learning and improvement.

5 What are some best practices for cost benchmarking?

Cost benchmarking is an effective tool for improving cost management and performance, but it requires careful planning, execution, and evaluation. To get the most out of cost benchmarking, you should define clear objectives and scope that are aligned with your business strategy. Choose reliable sources and benchmarks that are valid, accurate, and comparable. Utilize appropriate methods and tools for conducting your analysis, and apply consistent criteria and standards. Interpret the results of your analysis with caution and context, avoiding biased conclusions or assumptions. Involve your project team, stakeholders, and sponsors in the process to promote collaboration and learning.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?