Cost is one of the three pillars supporting project success or failure, the other two being schedule and performance. Projects that go significantly “over budget” are often terminated without achieving the project goals because stakeholders simply run out of money or perceive additional expenditures as “throwing good money after bad.” Projects that stay within budget are the exception, not the rule. A project manager who can control costs while achieving performance and schedule goals should be viewed as somewhat of a hero, especially when we consider that cost, performance, and schedule are closely interrelated.
Cost management consists of the four main activities or processes shown in below Figure. It requires an understanding of costs far beyond the concepts of money and numbers. Cost of itself can be only measured, not controlled. Costs are one-dimensional representations of three dimensional objects traveling through a fourth dimension, time. The real-world things that cost represents are people, materials, equipment, facilities, transportation, etc. Cost is used to monitor performance or use of real things but it must be remembered that management of those real things determines cost, and not vice versa.
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