Fast Project Plans
Bookmark and Share

Cost Management Plan Template

One of the things Project Managers most often struggle with is managing a project's cost. This Cost Management Plan template will help ensure that you have an approach and methodology to managing costs throughout the life of your project. This template is based on the cost management guidelines presented in the fourth edition of the PMBOK.

Cost Management Plan Template

Bookmark and Share

1.0 Introduction

1.1 Purpose

The purpose of the cost management plan must be clearly established in order to describe how project costs will be managed throughout the duration of the project. This section discusses, in general terms, why the cost management plan is necessary and an important part of overall project planning.

The purpose of this cost management plan is to define the methodology by which costs associated with the Building Expansion Project will be managed. This is necessary to ensure the successful completion of the project within the allotted budget constraints. There are several cost components associated with this project as well as many metrics, cost variance considerations, and reporting which this plan will outline. To complete this project successfully, all key project members and stakeholders must adhere to and work within this cost management plan and the overall project plan it supports.

1.2 Scope

This section describes what will be included in the cost management plan for this particular project. Project costs may consist of many internal and external components or unique items depending on the nature of the project. It is important to define the scope of what will be included in the cost management plan for a given project.

The cost management plan for the Building Expansion project includes many internal and external cost components. All metrics and variance analysis must be applied to these cost components throughout the project lifecycle. These components include:



This cost management plan does not include any monthly recurring costs (MRC) which will be required upon the completion of the project.

2.0 Cost Management Roles and Responsibilities

It is important to set expectations for roles and responsibilities in all areas of a project plan but particularly in the area of cost management. All team members and stakeholders must have a clear understanding of the roles they and others play in determining project budgets, allocation of funds, authorization for additional funding, and where the responsibility for each lies.

2.1 Project Sponsor

This section defines the roles and responsibilities of the project sponsor as they relate to managing the project’s costs.

The Project Sponsor for the Building Expansion Project is Mr. John Doe. Mr. Doe is responsible for the approval of the Building Expansion Project’s cost management plan. Additionally, Mr. Doe is responsible for approving the project’s budget and is the approving authority for any additional funding that may be needed. Mr. Doe will report project budget and funding status directly to Mrs. Jane Roe, the Vice President (VP) of Finance.

2.2 Project Manager

This section defines the roles and responsibilities of the project manager as they relate to managing the project’s costs.

The Project Manager for the Building Expansion Project is Mr. Joe Smith. Mr. Smith is responsible for the day to day management of project funds. Mr. Smith is responsible for the development of an internal Work Breakdown Structure (WBS) which covers all work to be performed by the operations group. Mr. Smith is authorized to execute the expenditure of project funds as necessary in accordance with the cost management plan and allocated project budget. Mr. Smith may not authorize the use of any additional funding without prior approval from the Project Sponsor. Mr. Smith is required to establish metrics and variance analysis tools in order to provide status updates once a month to the Project Sponsor.

2.3 Project Team

This section defines the roles and responsibilities of the project team as they relate to managing the project’s costs.

The project team is responsible for executing assigned work in accordance with the cost management plan. They are also required to assist the Project Manager in the implementation of metrics and variance analysis tools to ensure all project deliverables are performed within the allocated budget constraints.

2.4 Contractor Support

This section defines the roles and responsibilities of the external contractor as they relate to managing the project’s costs.

The contractor providing construction and related support for the Building Expansion Project is responsible for providing an initial project cost estimate which includes all costs associated with the project. Additionally, the contractor shall provide a WBS which includes all construction work packages and their associated costs. The contractor is responsible for executing work packages in accordance with all approved budget and funding requirements.

3.0 Cost Management Approach

This section outlines the approach that will be taken to manage project costs. The level and degree of detail may vary for this section based on the nature of the project and organization. This section should include paragraphs describing cost planning/estimating, cost tracking, cost reporting/metrics, and cost variance at a minimum. These paragraphs are where cost management is explained in detail.

3.1 Cost Planning and Estimating

This section describes how resources are estimated and how this translates into estimating cost for the project. Again, these processes and techniques may vary depending on the project and organization but all should use an approach consistent with Project Management Institute’s (PMI) Project Management Body of Knowledge (PMBOK).

Once the needs of the Building Expansion Project have been determined, the project team will finalize the resource and staffing requirements necessary for the successful completion of the project. The Project Manager and construction contractor team lead will complete the internal and external WBS respectively. Control accounts and staff labor categories will be created in each WBS element. Based on the labor costs and planned duration of each WBS element, an estimate will be determined. WBS element costs will then be totaled and used to request funding for the project. Once the project budget is approved, the Project Manager will compare the allocation for each WBS element against the overall budget and adjust allocations as necessary to comply with the project budget. Once all allocations have been reviewed and approved by the project manager, the project cost will be baselined. The project cost baseline may only be changed with authorization by the Project Sponsor.

3.2 Cost Tracking

This section should discuss how costs will be tracked throughout the project lifecycle. Tracking costs allows the Project Manager to see where potential problems may exist concerning project costs and it allows the team to gather appropriate data to generate the necessary metrics and reports.

All project team members and contractors will record their work associated with the Building Expansion Project on the appropriate timesheets using the appropriate labor categories and WBS cost accounts. Before close of business on the final business day of each month, the Project Manager will collect all of the timesheets and calculate the labor costs associated with each cost account. Additionally, any invoices associated with project capital equipment or other materials, licensing, or insurance will be copied by the receiving department each month and a copy will be provided to the Project Manager. The Project Manager will calculate actual costs for all cost categories and WBS elements and compare these actual costs to the projected baseline costs on a monthly basis. These comparisons will be used to generate the data for all metrics and status reports as well as variance analysis.

3.3 Cost Metrics and Reporting

This section should describe how project costs will be measured and reported. This section should include an explanation of what metrics will be used, how variance will be measured and acceptable thresholds, and the reporting structure and frequency for how these values will be communicated. This section is perhaps the most important paragraph of the cost management plan in that it is the foundation on which project cost performance is based. Most often, earned value management (EVM) is used by Project Managers to manage project costs and is consistent with the PMBOK. EVM is used to measure both cost and schedule performance as a function of the value the project has earned (EV), the actual costs of the project to date (AC), and the planned value the project should have earned to date (PV).

In order to measure project performance, several metrics will be used to capture cost and schedule performance for the Building Expansion Project. The following metrics will be compiled and reported by the Project Manager:

Earned Value Metric Frequency of Reporting Yellow Red
CPI Monthly


CPI<0.8 or CPI>1.2
SPI Monthly 0.8≤SPI≤1.2 SPI<0.8 or SPI>1.2

One chart will be created for each of the above metrics. The Project Manager will present these charts to the Project Sponsor at the Monthly Project Status Meeting on the 5th of each month.

3.4 Cost Control Measures

It is important to establish formal cost control measures in order to quickly correct any variances which fall outside of the acceptable thresholds. Once a threshold is exceeded, as identified by the metrics in the previous paragraph, steps must be taken to get the project back on track. This section outlines the process and responsibilities associated with implementing necessary corrective measures.

If the Building Expansion Project exceeds its thresholds at any time for its CPI or SPI, corrective measures will be considered and implemented in order to bring the project back into an acceptable range of performance. The Project Manager and Team will consider all control measures which will result in correcting the project performance. A detailed analysis of all control measures will be presented to the Project Sponsor. The analyses will consist of:

All control measures will be reviewed by the Project Sponsor. Upon approval from the Project Sponsor, the Project Manager will lead the implementation of the authorized control measure. The Project Manager must also complete any change requests required in accordance with the project’s change control process.

In some isolated circumstances it may be necessary to re-baseline a project’s costs. Every effort should be taken to avoid this. However, if necessary, only the Project Sponsor may authorize this action.

4.0 Approvals

All project and management plans must have the approval of the Project Sponsor and Project Manager. The signatures of these individuals indicate their acknowledgement and understanding of the project charter.

The signatures of the people below indicate an understanding in the purpose and content of this document by those signing it. By signing this document you agree to this as the formal Cost Management Plan for the Building Expansion Project.

Approver Name Title Signature Date
Doe, J. COO    
Jones, T. Project Manager    
Bookmark and Share      
Don't forget to download, share or bookmark this template.