Cost Management and Cost Control

INTRODUCTION Cost Management is the evaluation and control of project scope, budgets, and costs with the objective to minimize costs and maximize the benefits to be derived from the use of project resources in conformance with Criteria stipulated or approved by the Owner. In order of importance, Cost Management is one of the most prominent Project Management functions because of its impact on the financial success of the venture. Cost Control and Cost Accounting are essential parts of Cost Management. The principal objectives of Cost Control are to monitor project commitments and expenditures, and measure performance for the detection of variances from acceptable standards and from control budgets so that timely action can be initiated to minimize costs. Cost Control is evaluation of current costs and projection of future costs, rather than the reporting of actual costs. Cost Control is not Cost Accounting. The primary objectives of Cost Accounting are the determination, classification, analysis and reporting in useful detail of actual costs. Following are some considerations on Cost Management and Cost Control as practiced by Owners and Contractors of industrial projects, Mining and Metallurgical projects in particular. COST MANAGEMENT Functions Conforming with the requirements of Owner's Criteria, the principal Cost Management functions are to • evaluate estimates of project costs and establish budgets for a scope of work and schedule; conversely, evaluate the scope of work that can be executed most effectively within a budget and schedule. • promote investigations and comparative evaluations of alternate designs and plans to find the most cost effective way to execute a project and minimize its operating costs. • based on Cost Control and Cost Accounting input, evaluate and initiate appropriate actions to correct deviations from approved budgets. assess project economics, the effect of changes on project economics and, if necessary, revise Project Criteria to modify their impact on costs.