Manage Project Cost – BSBPMG514
Assessment Task 1 – Questioning
Project Cost Management is a series of activities for estimating, allocating, and
controlling costs within the project. It allows determining and approving budget for
the project and controlling spending. For example, in construction project cost
management it is vital to estimate cost of materials, equipment, salary of workers,
etc. In IT project cost management, it is critical to estimate cost of software
development, salary of IT staff, etc.
Following are the methods used for costing a project and conducting a cost analysis:
Bottom-up Estimating: The Bottom-up Estimating technique is also known as the
“definitive technique”. This estimation technique is the most accurate, time-
consuming, and costly technique for estimating the cost. In this technique, the
cost of each single activity is determined with the greatest level of detail at the
bottom level and then rolls up to calculate the total project cost.
Parametric Estimating: Like Analogous Estimating, Parametric Estimation uses
historical data to calculate cost estimates, however, it also utilizes statistical data.
It takes variables from similar projects and applies them to the current project.
Following are the tools used for costing a project and conducting a cost analysis:
: Many smaller businesses can’t afford a larger enterprise level
cost management software solution. Microsoft Project, while primarily focused on
project management, still provides a large measure of cost estimating and
management functionality that is especially useful for the small business focused
on the individual project. Project’s easy integration with the rest of the Microsoft
Office software suite includes Excel, as well as other popular small business
accounting apps, makes it a valid option for doing cost management on the
: aPriori provides enterprise-level cost management solutions for
businesses in the manufacturing industry. Their primary product offers the ability
to perform real-time cost analysis throughout the product lifecycle, from the
design stage all the way through production. The software’s analytical capabilities
shine a light on opportunities for quantifiable cost savings in material and labor
when comparing alternative designs, manufacturing processes, or material
Issue date: 18/10/2016