7.4.3 Development of Cost Plan

Home Page  <<  >>

The Cost Plan includes an estimate and a schedule of the costs that will be incurred in order to complete the project activities and tasks. The Cost Plan is usually prepared after the development of the Activities Schedule and the Resource Plan, since it requires input from both of them. Based on the information now known about the project as a result of Project Planning activities (i.e. more detail and greater accuracy regarding project activities, tasks and durations, a more detailed understanding of the resources required to perform the work and their associated costs), the Project Manager can refine the budget required to complete the project. This is particularly important when a project or some of its components are planned to be performed under contract (i.e. through a tendering process), since in this case the value of the contract should be accurately estimated in order to be included in the relative tender documents. The cost planning is also very important in case that the project is implemented with own resources (in-house production), since the establishment of a realistic and accurate cost plan will help you to effectively monitor costs during the execution and monitoring phase in order to stay within budget.     

In order to develop the Cost Plan, the following steps should be followed (Figure 7-9):

Identification and estimation of costs that are expected to be incurred in the project
Development of Cost Schedule by estimating when each of the costs will be incurred
Estimation of cost per activity/ task

Figure 7-9: Steps to be followed for the development of the Cost Plan

 

For simple projects the development of a Cost Plan may be limited to entering only the overall cost against the project activity on the Activities Schedule. However, for larger and more complex projects, a detailed Cost Plan should be completed to ensure that the overall expenditure is both accurate and appropriate.

There are various software packages in the market, such as MS Project and Primavera Project Planner (P3), which can be used to develop, monitor and control a detailed cost plan. However, for the purposes of this Guide a simple tool for developing a cost plan is provided in Annex 7-1 (in excel format) in order to be used by people who do not possess or are not competent in using the relative commercial software. The tool consists of two Sheets: one used for the preparation of the “Cost Schedule” and the other for the estimation of cost per activity/ task, named “Costs vs. Activities”. This tool can be used also for tracking financial progress during the project implementation period (refer to 7.5.3).

The following paragraphs describe analytically the steps to be followed in order to develop a Cost Plan.

 


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
Home Page | Government Web Portal | Disclaimer | Webmaster