How do you estimate and track project costs in your PMO?

1 Define the cost baseline

The cost baseline is the approved budget for your project, which includes all the direct and indirect costs associated with delivering the project outputs. To define the cost baseline, you need to identify and estimate all the cost elements of your project, such as labor, materials, equipment, travel, overhead, and contingency. You can use various methods and tools to estimate project costs, such as analogous, parametric, bottom-up, or three-point estimation, as well as historical data, expert judgment, or software applications. Once you have estimated the project costs, you need to validate and document them in a cost management plan, which will serve as the reference point for tracking and controlling project costs.

2 Monitor the cost performance

Monitoring the cost performance is the process of measuring and analyzing the actual costs incurred in your project against the cost baseline, and identifying any variances or deviations. To monitor the cost performance, you need to collect and record the actual costs of your project activities, such as timesheets, invoices, receipts, or expense reports. You also need to use key performance indicators (KPIs) and metrics to evaluate the cost performance, such as earned value analysis (EVA), cost variance (CV), cost performance index (CPI), or estimate at completion (EAC). By monitoring the cost performance, you can track the progress and status of your project budget, and identify any issues or risks that may affect the project outcome.

3 Report the cost status

Reporting the cost status is the process of communicating and presenting the cost performance information to the relevant stakeholders, such as sponsors, clients, team members, or senior management. To report the cost status, you need to prepare and distribute regular and accurate cost reports, which can include charts, graphs, tables, or dashboards. The cost reports should highlight the key cost information, such as actual costs, budgeted costs, cost variance, cost forecast, or cost trends. You should also provide clear and concise explanations and recommendations for any significant cost issues or changes. By reporting the cost status, you can keep the stakeholders informed and engaged, and ensure their alignment and support for your project.

4 Control the cost changes

Controlling the cost changes is the process of managing and implementing any changes to the project scope, schedule, or resources that may affect the project costs. To control the cost changes, you need to follow a formal and structured change management process, which can include steps such as initiating, reviewing, approving, communicating, and documenting the change requests. You also need to update and revise the cost baseline and the cost management plan accordingly, and reflect the impact of the change on the project budget and schedule. By controlling the cost changes, you can ensure that the project costs are aligned with the project objectives and expectations, and avoid any unnecessary or unauthorized changes that may compromise the project quality or profitability.

5 Review and improve the cost processes

Reviewing and improving the cost processes is the process of evaluating and enhancing the effectiveness and efficiency of your cost management practices and procedures in your PMO. To review and improve the cost processes, you need to collect and analyze feedback and lessons learned from your project stakeholders, such as surveys, interviews, or workshops. You also need to identify and implement best practices and improvements for your cost estimation, monitoring, reporting, and controlling processes, such as using standardized templates, tools, or methods, or conducting regular audits or reviews. By reviewing and improving the cost processes, you can ensure that your PMO delivers high-quality and cost-effective projects, and continuously improves its performance and maturity.

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?