|
Each time you update your Cost Schedule, you should review it to identify cost problems or potential problems. Identifying cost problems will allow you to take corrective actions to ensure that you will complete the project within the approved budget.
 Since Cost Schedule is changing constantly you have to analyze it each time you correct and refine it. In order to identify cost problems it is suggested that you take following steps:
| 1. | Review the baseline, actual and remaining costs to identify whether the project will or will not stay within budget. |
| 2. | Review cost variances per type of cost or per task to find out when and where the actual costs exceed or are less than the budgeted ones. |
| 3. | Find which types of costs are already over budget. Perform the same exercise with the tasks’ cost to find out if you need to make any reallocation of resources (or costs) to stay within budget. |
| 4. | Perform Earned Value Analysis (EVA) to get reliable answers to the questions “Is there enough money left in the budget to complete the project?” and “Is there enough time left in the schedule to finish the project on time?”. EVA is the most commonly used method for measuring project performance. It indicates how much of the budget should have been spent, in view of the amount of work done so far and the baseline cost for the task, assignment or resources. More details on how to perform Earned Value Analysis are provided in Annex 7-11. |
After you have identified cost variances that occur over time, you should take corrective actions to keep costs within budget. Before you make any major changes, it is recommended that you save a backup copy of the initial cost schedule, so that you can refer to it as you are making changes that may affect costs of other resources or tasks.
 In order to get an overview of options that are available keep costs under control, you have to consider how quality affects costs. The changes that you will make in your schedules to stay within budget depend mainly on your priorities. For instance, you could choose to sacrifice quality by using less expensive resources (e.g. people with less experience and skills, equipment with less operational power, materials of lower quality, etc.) or by removing some of the tasks you meant to accomplish. Alternatively, you could choose to spend a little more money on quality resources, under the thought that those resources will complete the task or project in significantly less time and probably with less total cost. Regardless of the actions you decide to take to reduce costs, you have to examine their effects on tasks, resources and quality of the deliverables. You may also need to discuss the effect of these actions on quality with the appropriate stakeholders.
 In order to keep costs within budget you can take the following actions:
| ● | Replace, remove or adjust the resources assignments to reduce the cost of tasks. When you've made new assignments or changed existing assignments, you need to communicate these changes to the resources who are assigned. |
| ● | Reduce rates of resources (if this is possible), who are assigned to tasks that are in danger of exceeding their budget. This can be possible only if you have included profit or overhead in the cost rate. |
| ● | Assign per-use costs more efficiently. This can be achieved, for instance, by combining tasks (i.e. let them run together), which involve the use of a resource with a per-use cost. |
| ● | Reduce or remove overtime work to eliminate overtime costs. Have in mind that when you reduce or delete overtime work, the duration of the task may be longer. |
| ● | Reduce unnecessary fixed costs. For example, you can cancel a travel that is not so important for the progress of the work or reduce the number of project staff that was scheduled to travel. |
| ● | Reduce the scope by shortening a task's duration or by deleting tasks that can be omitted. You may also need to remove resources when reducing scope, keeping the cost of resources down. |
 Once you have taken actions to optimise the costs, you have to examine their effects on:
| ● | Critical path to verify that the adjustments you made didn’t affect it adversely. |
| ● | Project dates and costs to verify that the adjustments you made do not jeopardise important dates or other costs. |
| ● | Resource allocation to verify that the adjustments you made do not cause any overallocations or underallocations |
| ● | Other projects to verify that the adjustments you made do not jeopardise other projects. |
|