Cost Management
Description
Cost management (as opposed to financial management) is an essential component of the Project Plan. It involves planning, estimating, monitoring and control of the total project costs throughout all phases of the National Project Management System (NPMS). The diagram below describes the evolvement of project costs estimates in relation to the NPMS Model.
Development of Project Construction Cost Estimates
Image description
This image describes the NPMS model with 3 stages, 9 phases, control points, deliverables and cost estimate categories.
- Project inception stage
- Definition
- Broad Cost Projection : Forecast of resources required for preparation of project approval (PA) and expenditure authority (EA) (planning and design)
- Project identification stage
- Initiation
- Deliverable: preliminary project plan
- Feasibility
- Analysis
- Deliverable: investment analysis report (IAR)
- Control point: project approval / expenditure authority (PA/EA) (planning and design)
- Identification close out
- Class D Construction Cost Estimate (Indicative): Develop the indicative construction cost estimate(s) (for each defined option where applicable) and update them as required throughout the phases as project information become more defined, whilst ensuring that current market condition is taken into consideration
- Initiation
- Project Delivery
- Planning
- Deliverable: project management plan (PMP)
- Design
- Deliverable: approval document (AD)
- Control point: amended project approval (if required)/expenditure authority for implementation (aPA/EA (imp))
- Class C / Schematic Design Construction Cost Estimate (Indicative): Prepare the indicative cost estimate(s) based on schematic designs for the various options.
- Class B Construction Cost Estimate (Substantive): At the end of design development, prepare the cost estimate based on the latest approved design documents, which meet the minimum requirements to support a substantive estimate. Refer to the Cost Estimate Definition, and the Minimum Requirements for Construction Estimates Preparation Checklist for details.
- Implementation
- Updated Class B Construction Cost Estimate (Substantive): The cost estimate shall be updated at the appropriate stages during the production of the construction/tender documents, in order to maintain cost control for the project
- Class A / Pre-Tender Construction Cost Estimate: Develop cost estimate based on the tender documents prior to bid
- Delivery Close Out
- Deliverable: close out document (COD)
- Construction Contract Final Account: Compile data on project's cost at completion
- Planning
The above diagram describes how cost estimates relate to the NPMS Model. In cases where funding approval is not obtained, the project may need to repeat earlier phases in order to provide the basis for a new funding submission.
The National Project Management System Directive on Cost Management for Real Property Projects has been developed to describe the components and requirements of NPMS as applied to the management of real property projects costs.
Objective
To ensure that total project costs are established and managed in a systematic manner through effective and timely monitoring and control that applies throughout the phases of a project as defined in NPMS.
Real Property Context
Cost management in real property projects commences from the initial inception and it continues right up to its completion and turnover. The ability to maintain the total project cost within budget (project cost limit/target) is one of the key measures of success of a project. Therefore, it is important that comprehensive and structured processes and techniques are adopted in cost management. The primary elements of cost management are estimating, planning, analysis and control. These must be utilized interactively throughout all phases of a project as defined within NPMS, in order to maintain consistency of control over the total project cost. The level of application of cost management techniques may vary based on the project size, complexity, funding approvals, and its level of completeness of design and the client requirements.
In order to achieve success with cost management of real property projects, project managers should ensure the inclusion of cost management discipline throughout the phases of their project. The cost management expertise is available through Public Services and Procurement Canada (PSPC) Cost Planners and also from qualified professional cost consultants.
Real Property Services (RPS) have created a national cost management centre of expertise located in the National Capital Area to provide national functional directions that promote consistency and effectiveness in cost planning, cost monitoring and cost control on projects.
Cost Management Toolkit
Related Documents
- Cost Estimate Definitions
- Guide to Cost Predictability in Construction: An analysis of issues affecting the accuracy of construction cost estimates, March 2010
- Date modified: