BSBPMG533

Manage project cost

Student Book
Topic 3 - Complete cost-management processes
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Table of Contents

3. Complete cost-management processes .......................................................................................... 2

3.1 – Conduct activities to signify financial completion according to task and organisational
requirements ........................................................................................................................................... 3
Financial completion ............................................................................................................................ 3
3.2 – Review project outcomes using available records .......................................................................... 5
Reviewing project outcomes................................................................................................................ 5
Project completion............................................................................................................................... 8
3.3 – Review cost-management issues and document improvements ................................................... 9
Reviewing cost-management issues .................................................................................................... 9
Documenting improvements ............................................................................................................. 10
References ............................................................................................................................................. 11
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3. Complete cost-management processes

3.1. Conduct activities to signify financial completion according to task and organisational
requirements

3.2. Review project outcomes using available records

3.3. Review cost-management issues and document improvements

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3.1 – Conduct activities to signify financial completion according to task and

organisational requirements
By the end of this chapter, the learner should be able to:
➢ Identify a range of activities that can be used to signify financial completion

➢ Create a checklist of activities required to signify financial completion according to task

and organisational requirements.

Financial completion
As you reach the final stages of your project, you will need to ensure that you have allowed for the
occurrence of unexpected delays; not all aspects of your project will finish at the same time or even on
time at all. The project team may be waiting for certain project tasks to be completed; you will need to
allow the project team the time to refer to these areas that may still need to be completed (including
financial matters).

Due to the uncertainty of the start and finish dates of some of the project tasks, it may be
necessary to adjust the project’s reporting stage and finalisation schedule.

Financial completion may include:

➢ Allocations and distributions

➢ Final payments

➢ Financial reports

➢ Organisational project accounting procedures

➢ Project accounts finalisation

➢ Variations statement.

Within the financial completion of any project, the future should be the focus – not necessarily what is
happening or has happened. Many reports that signify financial completion often focus on variances –
the differences between the planned results of the project and the actual results. In order to signify the
financial completion of your project, you will need to conduct the appropriate activities. By acquiring
the necessary signature at various stages within the project lifecycle, you are indicating the approval –
or the go-ahead. It is viewed as a project management milestone as it allows the project to progress
forward. By gaining the appropriate formal approval, you are acknowledging that a project deliverable
has been completed, reviewed and accepted.

An example of a completed financial record:

Project area Planned outcome Actual outcome Variance Reason for variance
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The different project areas that may be included in the table above include:
➢ Internal labour

➢ External labour

➢ Materials

➢ Facilities

➢ Training.
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3.2 – Review project outcomes using available records

By the end of this chapter, the learner should be able to:
➢ Identify key measurements and what would be evaluated with a review of project
outcomes

➢ Use records to assist in a review of project outcomes.

Reviewing project outcomes

The success of a project will need to be measured, regardless of the size, nature or complexity of it. In
terms of cost-management, the project outcomes would be to what extent the budget was effective
and adhered to overall. You can determine to what extent the outcomes were reached by assessing key
measurements throughout the project and after completion.

These measurements should be well-defined and may include:

➢ Whether the key milestones have been met

➢ How well the project was managed

➢ Whether the project outputs were achieved and delivered.

The review may include evaluations of:

➢ Agreed major milestones, for example, phases and subcontracts

➢ Change of key personnel

➢ Contingencies

➢ Delivery of major deliverables

➢ Finalisation of project and other agreed milestones

➢ Variations.

You can use lists of estimated and actual costs associated with the project to determine whether the
project costs were managed effectively:
➢ Were the estimated costs roughly accurate?

➢ What was the total cost overall?

o was this in line with budgetary expectations and allowances?

➢ Did the individual elements of the project meet cost expectations?

o what elements of the project were under- or overspent?

o what were the lessons learned?

➢ Did any contingencies occur?

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For example, the budget for a store refurbishment project was set at $30,000.

Project outcome(s)
The project outcome is to complete a store refurbishment for a cost of around $30,000.

Cost estimations
This consisted of the following estimations:
➢ $15,000 for the builders

➢ $10,000 for the decorators

➢ $5,000 for other miscellaneous activities, such as shop-fitting.

The estimation for project cost is $30,000.

Project cost
This consisted of the following actual expenditure:
➢ $25,000 for the builders

➢ $6,000 for the decorators

➢ $6,000 for the other miscellaneous activities.

The actual cost of the budget ended up at $36,000, $6,000 over the estimation.

Project cost records

The cost records you can use in this instance to determine whether the project met its outcomes
could be:
➢ Cost verification and validation documentation

➢ Invoice and payment records

➢ Lists of costs

➢ Project and/or organisation files and records.

This is because you need to understand what was spent and how this compares to the estimations and
budget.

Project cost-management
You would need to look at the records of total and individual costs to see:
➢ How much was spent overall

o the whole project cost $36,000

➢ Whether individual elements of the budget were met

o builders were overspent

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o decorators were underspent

o miscellaneous were overspent

➢ Where over-expenditure occurred and why

o builders: the building budget was overspent to a structural issue that needed
resolution. This was not part of a contingency plan, but the work needed to be
done, so the extra spend was approved

o miscellaneous: some shelves were found to be damaged and unusable, so money

was spent on new shelving

➢ Where under-expenditure occurred and why

o the decorators cost less than expected because less time and material was
required; this means that the estimation was overestimated

➢ Contingencies

o problems with fixtures and fitting were expected, so additional funds were
allowed for this. This means that the additional spend on new shelves was
approved and justified, and the budget was adjusted accordingly.

Review of project outcomes

Although both a contingency and an unforeseen problem occurred, the project cost-management was
adapted to handle these situations. Upon the completion of the project, it can be deemed that the
project did achieve its outcome of refurbishing the store on a budget of around $30,000.

If the project cost-management had failed to accommodate the additional expenditure, then it would
have been less effective.

In order to review the outcomes of your project, you could also use the records that are available.

These records may include:

➢ Budgets, commitment, and expenditure

➢ Cash flows

➢ Cost-management lessons learned

➢ Cost-management plans

➢ Invoice and payment summaries

➢ Lists of potential costs

➢ Project and/or organisational files and records

➢ Quotations
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➢ Recommended and approved courses of action

➢ Reports to relevant stakeholders.

By reviewing these records, you will be able to determine how effective your cost-management was.

Project completion
Example of a project completion report:

Project phase Completed? Signed off by?

The different project phases may include:

➢ Project overview

➢ Agreed changes

➢ Deliverables

➢ Final costs

➢ Risk assessment

➢ Recommended improvements

➢ Scheduled completion date

➢ Final date.

This project completion report may need signing off.

The person that may be required to sign the report off could be:
➢ The funding body

➢ The project sponsor

➢ The management

➢ The client or customer.

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3.3 – Review cost-management issues and document improvements

By the end of this chapter, the learner should be able to:
➢ Identify cost-management issues and describe ways to review them

➢ Document future improvements according to project details.

Reviewing cost-management issues

What is cost-management?
We know that cost-management involves planning and controlling a project budget and all the
associated procedures. It is a challenging and dynamic process that should not be confused with
accounting. It can help to predict any future expenditure whilst reducing the chances of going over
budget. However, the process doesn’t necessarily follow logical steps.

What did the organisation get for the amount of money that was spent whilst completing the project?

Essentially, the answer to this question can be achieved by reviewing the cost-management issues. The
reviewing of cost-management issues is an essential part of project management. Remember that the
level of detail that is required will depend on the project itself or the organisation. Any issues that have
occurred within the cost-management of a project, along with their outcomes and solutions, need to be
communicated.

Any cost-management issues may include changes to:

➢ Scope

➢ Schedule

➢ Quality

➢ Budget

➢ Functionality.

Throughout your project, you may have used a financial software

or system in order to help control the project expenditure. When
reviewing cost-management issues, you may want to refer back to
the software of systems that you used.

You can look at:

➢ The process of data application

➢ The process of tracking and reporting project expenditure

➢ The actual and estimated cost-management techniques that were used

➢ The input and functionality.

Could a different software or system be more appropriate?

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You may also need to look at the management of your project; were their methods appropriate? Did
the management have the necessary experience and/or knowledge?

When reviewing cost-management issues, remember:

➢ Be accurate

➢ Don’t bring personalities into the reviewing process

➢ Keep details objective

➢ Focus on outcomes or changes

➢ Look at positives as well as negatives

➢ Don’t be vague – give examples wherever necessary

➢ Look closely at risk identification

➢ Learn from any mistakes – suggest future improvements.

Documenting improvements
Any improvements that are highlighted when reviewing any cost-management issues should be
documented appropriately. The focus of any review is the future; procedures should be adapted in
order to strive for success. Specific cost-management recommendations should be made for future
projects that may be similar.

You may base your future improvements on:

➢ Suggestions from the project team and management

➢ Reports of costs to budget and time frames

➢ Stakeholder satisfaction surveys

➢ Reports on quality, efficiency, and performance.

The way that you document future improvements may depend on the organisational procedures that
are in place. Details of the suggested improvements may need to be included within the project
finalisation documentation. The documentation of suggested improvements can be used for future
projects.
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References

These suggested references are for further reading and do not necessarily represent the contents of
this unit.

Websites
Budget planning: https://opentextbc.ca/projectmanagement/chapter/chapter-12-budget-planning-
project-management/

Project costs blog: http://projectmanager.com.au/?s=project+cost

Project cost-management: http://www.projectsmart.co.uk/project-cost-management.html

Publications
Friedman, L., and Miles, S. (2006) Stakeholders Theory and Practice. Oxford University Press.

Rad, P.F. (2002). Project Estimating and Cost-management. Kogan Page.

All references accessed on and correct as of 15th June 2021, unless otherwise stated.