Abbott Project Management Playbook

9.4 C OST C ONTROL – C OST M ANAGEMENT P LAN DEFINITION: What is Cost Control?

Cost control is the element of Project Controls during Execution where the project manager monitors project cost performance vs. what was planned, using a variety of performance measurement options. The Cost Management Plan describes the processes for estimating, budgeting, and controlling costs. Cost estimates may be provided directly by the Project Team or through third party vendors. Elements/Process/Details Estimating - The Project Team will develop cost estimates for each activity in the WBS. The Project Team should determine the estimating techniques best suited to the Project at the time estimates are to be provided. Estimating techniques used by the project team should be documented in the Cost Management Plan. The WBS and the Project Scope Statement are good resources to prepare estimates as they include constraints and assumptions about the Project. Budgeting - At the onset of the Project, the Project Team will estimate capital and expense spending (Cash Flow) by month over the life of the Project, using the estimated capital and expense amounts listed in the WBS as the basis. The Project Team will update the cash flow projection if the Scope Baseline changes. Such projections are often represented graphically by an S-Curve as represented below.

This technique can be used for various types of quantities – spending, value of the work completed, hours expended, percent complete for engineering drawings, etc. When this graph represents the expected value of work to be earned over time and is established at the beginning of an activity, and the expected value to be earned is the same as the approved budget, this graph represents the project’s Planned Value (PV). PV will be discussed in the Earned Value Management section. At the project level, the S-Curve represents the aggregate of the individual activity costs in the work breakdown structure. For Abbott projects, the total aggregate cost is the RCE amount. An S- Curve can be generated for any project activity down to the work package level. The Cost Baseline is a specific version of the project estimate, accepted and approved according to the Project Management Plan. It is also the project budget as established in the RCE excluding the allowance and is the basis against which cost performance is measured and reported. The Cost Baseline is the Planned Value. With the Scope and Schedule Baselines, it governs Detailed Design and Project execution.

It is part of the Project Management Plan and can only be changed through the formal Integrated Change Control Process. It is a criterion used for evaluating change requests and prevent scope creep.

An important part of controlling cost is identifying the source of variances to determine if project management preventative and/or corrective actions are required. The Project Team will report potential

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