©
NSW Department of Education and Training (DET) 2005
All rights reserved. This work is copyright to NSW Department of Education and Training.
Permission is given to trainers and teachers to make copies by photocopying or other duplicating
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the materials for hire. Outside these guidelines, all material is subject to copyright under the Copyright
Act. 1968 (Commonwealth) and permission must be obtained in writing from the NSW Department of
Education and Training.
Disclaimer
The views expressed in this work do not necessarily represent the views of the NSW Department of
Education and Training. The NSW Department of Education and Training does not give warranty nor
accept any liability in relation to the content of this work.
This work has been produced initially with the assistance of funding provided by the NSW Department
of Education and Training, Training Development Unit, through the Training Resources & Support
Program with advice from the Product Advisory Committee.
Further copies of this resource are available from: Website: www.skillsonline.net.au
For further information, contact: Email: [email protected]
First published July 2005
Resource Development Team
Performance Development Solutions
Lorraine Wheeler & Assoc P/L
Precision Consultancy
RMIT
Training Plus Solutions P/L
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Product Advisory Committee
Deborah Griffin NSW DET
Catherine Chaffey Financial Services Education Agency Aust ltd
Suellen Freeman SW Sydney Institute of TAFE Bankstown
Campus
Paul Tweddell Dept Aging Disability and Home Care
David Makin/Neroli Sheldon AIM
Justine Mercer Moore NSW Chapter of the AIPM
Lorraine Wheeler/Stephen Auburn Project Team
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Contents
1. Introduction ....................................................................................................................................................... 4
1.1 How the learning guide is organised ...................................................................................................... 5
1.2 An overview of BSBPM504A Manage project costs.............................................................................. 5
1.3 Learning outcomes ..................................................................................................................................... 6
1.3.1 Elements of competency .................................................................................................................... 6
1.3.2 Knowledge and skills involved in managing project costs......................................................... 6
2. Project Costs: Topics and learning activities .............................................................................................. 8
2.1 About project costs .................................................................................................................................... 8
2.1.1 Definition(s) and Main Activities Involved in Project Costs ....................................................... 8
2.1.2 The Relationship of Project Costs and Project Phases ................................................................ 8
2.1.3 Responsibilities for managing project costs ................................................................................. 9
2.1.4 Stakeholder involvement in project costs .................................................................................... 10
2.2 Element 1: Determine project costs ...................................................................................................... 10
2.2.1 Determine resource requirements for individual tasks ............................................................ 11
2.2.2 Estimate project costs and implement cost management processes .................................... 12
2.2.3 Develop and implement a cost management plan ..................................................................... 18
2.3 Element 2:Monitor and control project costs ..................................................................................... 19
2.3.1 Implement financial management processes and procedures ................................................ 20
2.3.2 Select and use cost analysis methods and tools ....................................................................... 20
2.3.2 Implement, monitor and modify agreed actions ........................................................................ 21
2.4 Element 3:Conduct financial completion activities ........................................................................... 21
2.4.1 Financial completion activities ....................................................................................................... 22
2.4.2 Review of project outcomes ........................................................................................................... 22
2.4.3 Cost management lessons learned ............................................................................................... 23
3. Assessment and demonstration of competency ...................................................................................... 26
3.1 Developing an evidence portfolio ......................................................................................................... 26
3.2 Products that can be used as evidence of competency .................................................................... 27
3.3 Processes that can be used as evidence of competency .................................................................. 27
3.4 Record of your work experiences relating to project cost management ..................................... 28
3.5 Assessment Activities .............................................................................................................................. 30
4. Resources and reference materials ............................................................................................................. 33
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4.1 Project costs proformas and templates ............................................................................................... 33
4.2 Further references .................................................................................................................................... 37
4.2.1
General references ........................................................................................................................ 37
4.3 Key terms in Cost Management ............................................................................................................. 39
List of Activities
Reflection: Cost Analysis Tools ...................................................................................................................... 21
Reflection: Project Completion Checklist ..................................................................................................... 22
Reflection: Personal and organisational learning ....................................................................................... 25
Assessment Activity Estimating Project Costs ............................................................................................ 30
Assessment Activity: Developing a cost management plan ..................................................................... 30
Assessment Activity: Monitoring and controlling costs ............................................................................ 30
Assessment activity: Project Completion Checklist ................................................................................... 31
Assessment Activity: Project Completion Evaluation ................................................................................ 32
Assessment Activity: Personal and organisational learning ..................................................................... 32
Index to templates
Estimate of project costs ................................................................................................................................... 33
Resources Matrix i ............................................................................................................................................... 33
Resource Usage Chart ........................................................................................................................................ 34
Overall project budget : ..................................................................................................................................... 34
Budget Expenditure plan ................................................................................................................................... 35
Project Budget Format ........................................................................................................................................ 36
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1. Introduction
Welcome to these materials, developed by the NSW Training Resources and Support
Program (TRS) of the NSW Department of Education and Training to support delivery
of the Diploma of Project Management (BSB51504) from the Business Services
Training Package (BSB01).
These materials should be used in conjunction with the learning guides for the other
units of competency in the qualification and the relevant assessment activities from
the Assessment Guide including holistic and up front assessment activities.
The design of the materials is based on the assumption that project management is
not an entry level qualification and learners are likely to have existing training and
qualifications. This learner guide is aimed at learners who will be working as project
team members in a single project or in one area of a large, complex project.
This is the learning guide that applies to the national unit of competency BSBPM504A
Manage project costs from the Diploma of Project Management BSB41504 and is
designed for use in conjunction with other relevant components of the Kit. There are
two other units of competency closely related to BSBPM504A Manage project costs.
These are:

(BSBPM403A) Apply cost management techniques: This unit applies to
functions normally carried out by project team members under the
direction of the project manager and working with other project team
members

(BSBPM604A) Direct cost management of multiple projects/programs.
This unit applies to the functions performed by a project manager to
manage costs within multiple projects and programs.
The required units of competency to attain the Diploma of Project Management
BSB51504 are:
(BSBPM502A) Manage project scope
(BSBPM503A) Manage project time
(BSBPM504A) Manage project costs
(BSBPM505A) Manage project quality
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(BSBPM506A) Manage project human resources
(BSBPM507A) Manage project communications
(BSBPM508A) Manage project risk
(BSBPM509A) Manage project procurement
(BSBPM501A) Manage application of project integrative processes
1.1 How the learning guide is organised
This learner guide is divided into four sections:

Section One provides an overview of the unit of competency.

Section Two contains information and activities arranged around
topic areas that reflect each of the elements in the unit of
competency. The activities include reflective questions, problem
solving exercises and activities involving workplace research. Many of
the activities draw on the five case studies provided with these
materials

Section Three provides information about assessment and
demonstration of competency. It includes proformas for recording
evidence of competency and assessment activities.

Section Four contains a number of relevant templates and proformas,
a glossary of terms and a guide to electronic and print resources and
reference materials.
The design of the materials is based on the assumption that project management is
not an entry level qualification and learners are likely to have existing training and
qualifications. This learner guide is aimed at learners who will be working as project
managers in a single project or in one area of a large, complex project.
1.2 An overview of (BSBPM504A) Manage project costs
This unit specifies the outcomes required to identify, analyse and refine project costs
to produce a budget, and use this budget as the principal mechanism to control
project costs.
A project manager usually performs these functions.
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1.3 Learning outcomes
The information and activities in this Learning Guide aim to assist you to achieve the
following outcomes:
1.3.1 Elements of competency
The elements that are the critical outcomes of the unit of competency are:
1. Determine project costs
2. Monitor and control project costs
3. Conduct financial completion activities
1.3.2 Knowledge and skills involved in managing project costs
The unit of competency identifies the required knowledge and skills listed below.
Learning and assessment activities in this guide aim have been developed to reflect
all items on this list.
Required knowledge and understanding include:

the need to link time, cost and resources to the project framework

acceptance of responsibilities for cost management

development of project budgets and expenditure forecasts

use of the budgets and expenditure forecasts as control
mechanisms

the place of cost management in the context of the project life
cycle and other project management functions

appropriate cost management methodologies, their capabilities,
limitations, application and outcomes
Required skills and attributes include:

ability to relate to people from a range of cultural and ethnic
backgrounds, and physical and mental abilities
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
project management

financial management
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
planning and organising

communication and negotiation

leadership and personnel management

monitoring and review skills

attributes include: analytical abilities, ability to maintain an
overview, communicative and able to provide positive leadership
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2. Project Costs: Topics and learning activities
2.1 About project costs
This Learning Guide is about providing you with opportunities to practice and
demonstrate skills and knowledge required to manage project costs. If you think you
already know how to do this, go to Section Three of the Learning Guide for advice on
how to collect evidence for assessment.
2.1.1 Definition(s) and Main Activities Involved in Project Costs
Project costs concerned with:
 determining project costs by examining resource requirements and
developing estimates in order to develop and have approved a project
budget and implement a cost management plan;
 Monitoring and controlling project costs by implementing financial
management processes and procedures, selecting methods and tools to
identify cost variations and to take action;
 Conducting financial completion activities and reviewing project
outcomes to determine the effectiveness of cost management
processes and to identify costs manage issue s and recommend
improvements.
2.1.2 The Relationship of Project Costs and Project Phases
Project costs is important at all stages of the at all stages of project operations. You
must demonstrate an understanding of. The summary below provides information on
considerations at the different stages that impact on learning and assessment
activities.
Proponent phase – ie before a project proposal is submitted (initiation/concept
phase)
The main task in this stage is to develop an estimate of costs for the project
proposal. This is often called a rough order-of-magnitude estimate. Rather than an
actual estimate of costs, this estimate often represents an amount that cannot be
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exceeded if your project is to have an acceptable return on investment. This type of
estimate has a low level of confidence.
Approval phase – once a project is approved (planning/development)
The main tasks in this phase are the development of the detailed budget estimate
and obtaining approval for the project budget. Develop the detailed budget estimate
after you specify the required project activities.
Implementation phase – when the project is underway (delivery)
At the commencement o f the project, when personnel and resources have been
allocated to the project, it is important to review the budget with the project team
and stakeholders (if necessary). If it is necessary to revise the budget, approval will
be needed.
It will also be necessary to establish appropriate controls over expenditure such as
purchasing through the use of delegations, purchase orders and other forms of
approval. Regular financial management reporting and analysis will also be required
During a project it is necessary to regularly monitor and review costs and
expenditure against budget to identify situations that may require changes to the
approved project budget. Again approval will be required.
Completion phase - review (finalisation)
Preparation of end of project financial reports, disposal of project assets,
redeployment of staff and finalisation of contracts.
2.1.3 Responsibilities for managing project costs
Personnel
Responsibility
Project manager
Provides and manages the project schedule
Resources the project according to work and
human and financial resources required
Communicates project budget information
Monitors and reviews financial performance
Authorizing agent/agency
Champions the project
Acts a inspirational figurehead
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Helps to finalise top level financial goals
Works to minimise operational constraints
Prioritises active projects where conflicts exist
Approves financial allocation
Provides clear strategic direction
Project team member(s)
Assists with the development of the project
budget
Monitors project costs
Contributes to cost finalisation process
Provides technical skill and application
Responsible for project task performance
Takes directions form Project Manager
2.1.4 Stakeholder involvement in project costs
Stakeholder interest in project costs will vary from project to project. The key
stakeholder in all projects will be the Project Director or higher authority.
2.2 Element 1: Determine project costs
Learning outcomes covered in determining project costs include:

Determination of resource requirements for each task (detailing
constraints and assumptions);

Estimation of project costs and implementation of cost management
processes;

Development and implementation of a cost management plan
describing how variances will be managed
Project cost estimates are an important component of the project proposal. The
sorts of questions that a project sponsor or higher authority may ask when
considering a project proposal include:

What is the estimated budget for the project?

How was the estimate determined, who determined the estimate and
what ids the confidence level in the accuracy of the estimate?
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
Does the budget allow for continent funding and under what
circumstances can it be accessed?

What are the draw-down procedures for spending the budget?

Have all project costs been captured?

What accounting reporting and control measures need to be followed?

What type of contracts will be used to manage costs?

What deposits or progress payments may be required?
It is essential that the processes and tools that you use to determine project costs are
able to answer these questions.
2.2.1 Determine resource requirements for individual tasks
Cost estimates are quantitative assessment of the likely costs of resources required
to complete project activities. They must cover all projected cost areas including
labour, materials, supplies, administrative costs and other categories as appropriate.
These cost estimates are refined during the life of a project as additional information
becomes available.
There are three main methods of cost estimating:
1. Bottom up estimating: estimating the cost of individual activities and rolling
these up to determine project costs
2. Analogous estimating: “top down” estimating which involves using the actual
costs of a previous similar project to make an estimate for a planned project
3. Fixed budget estimating: taking the total amount of money available to the
project and dividing it across project components to ascertain what you can
and can’t afford.
You will need the following information in order to estimate costs:

Description of all project activities

Description of resource requirements – this may be contained in the
Work Breakdown Structure

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Rates or costs of resources (e.g. labour cost per hour or per day)
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
Task duration estimates – again from he Work Breakdown Structure

Any relevant historical data

Chart of accounts
There are two types of resources: Variable cost resources and fixed cost resources.
With variable cost resources the cost varies according to the effort expended. An
example of variable cost resources are labour costs which will usually be based on
the number of hours taken to perform the task.
Resources such as equipment hire or licence fees are fixed cost resources since they
involve a one off cost, no matter how much effort is expended.
To estimate project costs you will need a worksheet that looks something like this:
Activity
WBS
Description
Code
Resources required
Duration
Resource
Resource
name & rate
name & rate
Other costs
Total costs
by activity
You may like to set up a spreadsheet or use project management software to
estimate costs. A sample spreadsheet is included in section 4.1.2.
2.2.2 Estimate project costs and implement cost management
processes
A project budget is a detailed, time phased estimate of all the costs of resources
required for your project. A budget is usually developed in stages: from a rough
estimate at the scoping stage to a detailed budget estimate and on to a completed
and approved project budget. Approved budgets may need to be revised during a
project as a result of approved changes or project reviews.
There are two types of cost that you will need to take into account: direct costs and
indirect costs.
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
Direct costs are costs for resources that are directly attributable to
your project. They may include: salaries for your project team,
contractor costs, materials, supplies and equipment.

Indirect costs are costs which are incurred to support project activities
but that are not tracked individually. They normally fall in to two
categories: overhead costs (employee benefits, office rental, furniture
and equipment) and administrative costs (such as salaries of
executive management or the finance department, accounting fees
and legal services).
Remember also to include an amount for contingencies to provide for unknowns
throughout the project.
Developing a budget is the process of allocating the cost estimates to individual
activities to establish a base line for measuring project costs. It is usual, especially in
larger projects, to develop a time phased budget in which cost estimates are broken
down by time periods. This will help you to work out how much you should be
spending and when. This will also assist you to manage cash flow.
It is also recommended that whenever you are preparing budgets, you state the
assumptions underlying your estimates, show the tolerance level that stakeholders
will accept, key factors affecting the validity of your estimates and how the estimates
were derived.
You will therefore need to develop two documents:

a budget for the whole project and

a cost management plan. The cost management plan will be covered
in the next section.
Budget development
To develop a budget you will need:
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
Project cost estimates

Work breakdown structure

Project schedule; and
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
Your organisation’s policies and preferred formats for budgets.
You will need to develop several tools to assist you to work out your budget:
1. A resources matrix (for non staff resources)
2. Individual resource usage charts (for each resource)
3. A summary usage chart (for all non staff resources)
An example of a Resources Matrix is:
Activity
WBS
Description
Code
Amount of Resources required (hours)
Contractor
Test Lab
Statistician
A
Engineering
advice
An example of a Resource Usage Chart is:
Test lab time required
Week 1
Task 1
Week 2
10
Task 2
Task 3
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20
20
40
20
30
10
30
40
30
80
130
10
20
TOTAL
10
20
Task 4
TOTAL
Week 3
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You overall project budget may be presented in a similar manner to the following:
Project Budget for ……………………………………………
Cost category
Direct Labour
Detail
Cost
Total
Project manager: 600 hours @ $45 per
hour
27,000
Project team A: 600 hours @ $35 per
hour
21,000
Project team B: 200 hours @ $60 per
hour
12,000
60,000
Indirect costs @ 40%
24,000
Other Direct costs
Materials
3,000
Travel
5,000
Contractors
15,000
Contingency
17,000
17,000
Total
23,000
TOTAL PROJECT COSTS
$124,000
In addition to the overall project budget, you will need to know what you are
planning to spend and when. To do this you will need to make and complete a
worksheet with headings such as these depending on how often you want to monitor
your spending:
Budget Spending Plan
Activity
Account
Budgeted
Budgeted
Budgeted
(WBS)
code
January
February
March
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Budgeted etc
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List all the project activities. For each activity, look at the project schedule and the
cost estimate to work out how much will be spent in the first period, second period
etc. Then list the amounts in the columns beside each activity. You may wish to list
specific resource costs under each activity as they may have different account codes).
Present you preliminary budget and spending plan to an expert colleague as a reality
check. You will also need to consider the project risk management plan as it is wise
to build into the budget an amount for contingencies.
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Reflection activity:
Developing a budget
Read the Case Study Fred’s Shed. The following is a sample WBS for Building a Shed. Develop a project budget (based on the costs in the WBS) for
presentation to the Project Steering Committee. You may also wish to develop a Budget Spending Plan to map out cashflow.
Task
Task Description
Predecessor relationship
Number/ID
Time
Resources (people and materials required to
Costs
complete the task)
(sequence )
1.
Preparation phase
1.1
Design Shed
N/A
3 days
Designer
$1000
1.2
Obtain council approvals
1.1
14 days
Project manager to submit engineering, design
$500
specifications and construction certificates
1.3
Sign Contract
1.1, 1.2
0.2 days
Project manager
$0
2
Construction Phase
2.1
Check existing boundaries
1.1, 1.2
1 day
Surveyor,
$1500
2.2
Check underground cable locations
1.1, 1.2
1 day
Project manager to contact utilities
$100
2.3
Establish site services and amenities
1.1, 1.2
2 days
Fence construction team (2), electrician, plumber,
$6000
require hired toilet, fencing materials
2.4
Excavate site
2.1, 2.2
3 days
Excavation team (3)
$7,500
2.5
Pour Concrete and wait for it to set
2.4
2 days day
Construction team (4)
$8,000
2.6
Install Shed
2.5
2 days
Construction team (4)
$15,000
3
Completion Phase
3.1
Connect utilities to shed
2.6
2 days
Electrician, Plumber
$2,500
3.2
Clean up site
2.5
3 days
Construction team (2)
$3,500
3.3
Hand over keys and warranties
3.2
1 day
Project Manager
$0
3.4
Final Payment
3.3
0 days
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$0
Cost management controls
You will also need to put in place a series of controls over expenditure. These may
include:

approval processes

contract negotiations and approvals

financial authorisations/delegations

invoice and payment procedures

communication and reporting processes
2.2.3 Develop and implement a cost management plan
Now that you have developed a budget, you will need to develop and implement cost
management strategies and processes to ensure that you keep control of your project
costs.
The strategies and processes that may be used include:

Measurement of actual progress against planned milestones

Recording and reporting of variations

Implementation of financial control mechanisms; and

Communication with stakeholders, dispute resolution and procedures for
modifying plans and budgets.
Your organisation will have financial policies, procedures and systems in place. As a
Project Manager you need to be familiar with them. In particular you need to be familiar
with payment processes, and importantly with financial reports that are available. You will
need to discuss how your project will be tracked with the staff of the Finance Department.
For example, you may need to have a cost centre or job number established within the
accounting system.
The following is an example of a cost management plan.
Cost Management Plan
1. Objectives
1.1. This document will describe how cost variances will be managed for this project.
2. Expected Stability of Project Cost
2.1. Project costs are allocated based on performance objectives defined in the task order. The
detailed project plan was developed with these performance objectives in mind. Although the
Project Manager may adjust the amount allocated for a given performance objective, and ‘turn on’
partial payments for a given performance objective, the total cost is expected to remain stable.
3. Cost Variance Response Process
3.1. Once the project schedule is base lined, the Project Manager is responsible to ensure that actual
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effort, start and end dates are entered for each activity, as well as actual costs for fixed cost
resources. T his data is essential to establish whether cost variances exist.
3.2. Major Problems
3.2.1. On a regular basis, but not less than once monthly, the project manager will produce
an Earned Value Analysis Report, which will identify cost variances for this project.
3.2.2. Any cost variance of greater than + / - 5% of the aggregate project budget will require
development of a cost variance analysis report to determine the root cause.
3.2.3. Any cost variance of greater than + / - 20% for a single project activity or task will
require development of a cost variance analysis report to determine the root cause.
3.2.4. If the cost variance corrective action is relatively minor, it may be documented on the
Cost Variance Analysis Report in the field provided. However, if the corrective action is
more detailed, a separate corrective action report – cost control should be completed.
3.2.5. It is likely that major issues will require a scope change or a request for additional
funding to address the cause of the major problem.
3.3. Minor Problems
3.3.1. Minor variances will be absorbed into project budget.
4. Cost Change Control Processes
4.1.1. Identify and assess the change. These would typically be generated from a cost
variance analysis, but not necessarily.
4.1.2. Fill out a “Change Request Form” and submit the “Change Request Form” along with
required supporting documentation to the project manager.
4.1.3. The Project Manager will review the change request and may possibly request
additional documentation prior to review with the project Director.
4.1.4. The Project Manager and Project Director will jointly evaluate the change. The Project
Director ultimately decides if the cost related changes will be accepted or not. Using the
“Change Request Form”, the Project Director will mark the change as:
4.1.4.1. Approved, in which case both project managers will check the approved box,
sign off on the change request and the Project Manager will incorporate the change
and adjust other project planning factors as necessary.
4.1.4.2. Approved pending additional supporting documentation, in which case both
the Project Director and the Project Manager will check the approved /pending box,
sign off on the change request and the project manager will specify and coordinate
gathering of the required documentation, incorporate the change and adjust other
project planning factors as necessary.
4.1.4.3. Denied, in which case both the Project Director and the Project Manager will
check the denied box, sign off on the change request and the Team IBM project
manager will notify the requestor of the status and reason for denial.
4.1.5. The project manager will document the Change Request outcome as necessary (update
WBS, schedule and budget documentation if impacted).
5. Associated Documents
5.1. Assumptions and Constraints Document
5.2. Cost Estimates
5.3. Work Breakdown Structure (WBS)
5.4. Cost Variance Analysis
5.5. Resource Rates
5.6. Activity Duration Estimates
2.3 Element 2:Monitor and control project costs
Learning outcomes covered in monitoring and controlling project costs include:
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
Implementation of procedures to monitor actual expenditure and control
costs;

Selection and use of cost analysis methods and tools to identify cost
variations, evaluate options and recommend actions to a higher project
authority; and

Implementation, monitoring and modification of agreed actions to maintain
financial and overall project objectives throughout the project life cycle.
2.3.1 Implement financial management processes and procedures
In the last section you developed a cost management plan and had it approved by the
higher authority. This plan required you to develop and implement strategies and
processes that have included:

Measurement of actual progress against planned milestones.

Recording and reporting of variations

Implementation of financial control mechanisms

Communication with stakeholders, dispute resolution and procedures for
modifying plans and budgets.
A budget is not a useful document unless it is used to compare budgeted to actual results.
If there is a variance in expenditure from budgeted expenditure to actual expenditure this
variance needs to be investigate and action taken to correct the cause. Common reasons
for discrepancies include:

Incorrect initial budget figures;

Unexpected rises in costs during project;

Errors in documentation;

Project progress not to schedule;

Changes in scope; and

Budget cuts.
Your plan is now approved and the next step is to implement it. This means that you need
to make sure that your people and systems are aligned, that all parties are aware of the
reporting and control mechanisms that are in place and that all relevant parties are
committed to ensuring that they are carried out in a timely and accurate manner.
2.3.2 Select and use cost analysis methods and tools
It is important that costs be managed throughout the project life cycle. There are a
number of tools that are available to monitor expenditure and control costs.
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You need to be able to monitor income and expenditure against both the agreed project
plan and milestones and to the project budget. You need to be able to identify variations
in costs against budget and to understand the reasons for the variation.
You will need to develop a report that allows you to you to understand what is happening
in your project. This is an example of a report format:
Project Budget <month> <year>
Budget
Actual
Variance
Acceptable
Responsibility
tolerance
Corrective
Assumptions
action
Reflection: Cost Analysis Tools
What other tools may you need? Once you have identified variances to
budget, describe the processes that you would use to evaluate options to deal
with the variance and how you would make recommendations to the higher
authority.
2.3.2 Implement, monitor and modify agreed actions
In the previous sections you have developed a series of processes and reports that
comprise your cost management plan. Plans are dynamic artefacts that must be monitored
and changed as circumstances evolve. It is therefore necessary that you implement agreed
actions, and monitor and modify them throughout the project life cycle to maintain
financial and overall project objectives. It is important that you keep these records of
approved changes for reference during the project and include such approvals in reports
to the higher authority and other stakeholders.
2.4 Element 3 :Conduct financial completion activities
Learning outcomes covered in financial completion activities include:

Conducting appropriate activities to signify financial completion (such as
transferring financial assets, liabilities and records to client or operational
support agency);
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
Conducting a review of project outcomes to determine effectiveness of cost
management processes and procedures; and

Identifying cost management issues and recommending improvements
Reflection: Project Completion Checklist
Work through the remainder of section 2.4. As you do, develop your own project
completion checklist for use in your own project.
2.4.1 Financial completion activities
In order to finalise and transfer financial assets, liabilities and records you will need to
find out what your organisation’s specific requirements are:
Step 1 Assembling documentation
Gather the following documentation:

Work Breakdown Structure

Progress Reports

Change requests

Any planning documents that established the performance measurement
framework

Detailed descriptions of the project’s finished product/deliverable/s

Contractor correspondence relating to terms and conditions of
performance, contract changes or clarifications

Contract changes

Contractor payment request and tax invoices
Step 2 Inspect to determine completion of (project) phase

Measure, examine and test the deliverables to ensure that results conform
to project specifications.

Conduct a procurement audit to identify contractor successes and failures.
2.4.2 Review of project outcomes
Step 3 Conduct a project team review

This review may include evaluation of agreed major milestones (for example phases
and sub-contracts); provision of major deliverables; change of key personnel,
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finalisation of project and other agreed milestones. The records that will be useful
in such a review include:

lists of potential costs

invoice and payment summaries

budgets, commitment and expenditure

cost management plans

reports to a higher authority

recommended and approved courses of action

project and/or organisation files and records
2.4.3 Cost management lessons learned
Reflection on individual and organisational learning that occurs during projects is a useful
way of capturing lessons learned so that they can be passed on to future projects and over
time be used to enhance organisational capacity. There is normally a formal post project
review process that encompasses all aspects of a project.
In this section we will focus on cost management aspects of the project. It is important to
involve both the project team and stakeholders in this process. It is suggested that you
undertake this task in two phases: with your project team and with your project
stakeholders.
It is also suggested that you hold a team review to discuss how the project went. You may
like to start the meeting with a brief overview of the project budget report. What were the
planned financial outcomes for each phase of the project, and what actually happened?
Can the team identify and summarize why the costs of a particular phase were greater or
less than planned? You may wish to use the following table to summarise this
information:
Brief Overview Of The Project Budget Report
Project Stage
Planned Costs
Actual Costs
Notes on cost issues
Have the team members brainstorm wins and challenges in relation to managing
costs and budgets.
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Summary of lessons learned
Challenge
Lesson Learned and Recommendations
Some specific questions that you might ask about project costs and budgets follow.
Each question could be used as a discussion starter and focus on how the issue in
question could be improved.

How was the project budget developed? How accurate were forecasts and
estimates? How could this be improved?

What procedures and controls were put in place? How effective were they?

How did the project perform in relation to budget? Were there variances
and how were they managed?

Were there any changes to project scope that had cost implications? How
were they managed?

How were project risks managed and what implication did that have for
cost and budget management? How were those issues managed?

If the project were to be run again, how might costs and budgets be
developed and controlled differently?

Was the Project Sponsor satisfied with the financial reports provided
during the project?

Was the Project Sponsor satisfied with the financial performance of the
project?

Would the team’s performance and the project outcomes be improved by
any additional training activities in relation to financial management?
It is usual to undertake a stakeholder debrief and evaluation at the end of a project.
Cost management issues need to be addressed as part of this process. Remember
that stakeholders include the client, others with a vested interest, the Project
Manager and the project team. Some of the cost and budget related questions that
might be posed include:
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
What improvements can you suggest that would assist in how future
project costs and budgets are established and managed?

Were you satisfied with your level of involvement in the project?

Were you always kept informed of the project’s successes and failures?

What part did you play in the decision making processes?

Was the project team appropriately skilled in relation to managing costs
and budgets? What additional training may have been helpful?
Reflection: Personal and organisational learning
Describe the process that you would undertake to capture personal and
organisational learning. Develop a framework for a close out report to your
management. Include headings and an explanation of what you would include
under each heading.
Step 4 Obtain formal acceptance
Obtain formal acceptance, in writing, that the sponsor has accepted the product/end result
of the project (phase).
Step 5 Formal acceptance of contractor deliverables

Write to contractors formally accepting their deliverables

Update the contractor files
Step 6 Update and archive records

Update paper based and electronic project records.

Archive records in accordance with your organisation’s records
management policy
There are other project completion activities that may be required, however they do not
relate to project costs and are covered in other learning guides.
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3. Assessment and demonstration of competency
A person who demonstrates competence in this unit must be able to provide evidence that
they have taken responsibility for cost management of projects. This will include evidence
of managing the work of others within the project team with respect to costs. Evidence
presented must meet the performance criteria for each element and demonstrate that you
have the required knowledge and understanding and skills and attributes to manage the
project costs.
3.1 Developing an evidence portfolio
What is an evidence portfolio?
An evidence portfolio is a collection of documents and other documentary evidence (such
as film or photographs) that show what work you have done and the skills and knowledge
you have developed. There are a number of reasons why you might put together an
evidence portfolio:

So that you can demonstrate competency to a qualified assessor and
apply for formal recognition of competency

For your own records and as part of your curriculum vitae

As a resource to use in your role as a volunteer or in other work

As a reference for your own further learning and resource to assist
others you may train and mentor
What does it look like?
What an evidence portfolio looks like depends on both the sort of evidence you are
collecting and the purpose for collection.
You might start with a box into which you put any documents, photographs, things you
have made to be sorted out later. You could use a concertina file or a set of document
folders, a ring binder or perhaps (if you are collecting documents in a large format) an art
student folio.
The most common and flexible format for a portfolio is probably the ring binder
containing clear plastic sleeves for holding collected documents and artifacts, as this will
enable you to collect and store evidence and then when presenting the portfolio, to write
any explanations of what you are presenting.
What does an Evidence Portfolio contain and how is it organised?
Again this depends on the purpose of the portfolio. When building an evidence portfolio to
apply for formal recognition against nationally endorsed units of competency, such as the
unit you are studying now, then the documentary evidence you collect should be organised
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under headings that relate to the elements and performance criteria for the unit of
competency.
3.2 Products that can be used as evidence of competency
Cost management products that could be used as evidence of competency in this unit
include documentation produced in managing project costs such as:

cost estimates

cost management plans and strategies

cost breakdown structures

project budgets and expenditure forecasts

financial transition plans

records of project finalisation activities and disposal of project assets

project finalisation reports

records of cost management lessons learned
3.3 Processes that can be used as evidence of competency
Cost management processes that could be used as evidence of competency in this unit
include:

how resource requirements were determined

how cost management plans were developed

how team members were managed throughout projects with respect to
the costs of the project

how problems and issues with respect to costs were identified and
addressed

how projects were reviewed with respect to costs

how cost management improvements were actioned
If you think that you already have some or all of the evidence required as evidence of
competency, the following proforma can be used to record your work experience relating
to managing project costs.
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3.4 Record of your work experiences relating to project cost
management
3.4.1. On the lines below list and outline any projects in which you have been responsible
for managing project costs
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3.4.2. In the table below record the evidence you can produce to indicate that you have
undertaken the activities covered by this section of the Kit. You should identify at least
two examples of each one.
Work processes
Examples of Evidence
How resource requirements

cost estimates

cost breakdown
Your list of evidence
were determined
structures
How cost management plans

cost estimates

cost management plans
were developed
and strategies

project budgets and
expenditure forecasts
How team members were

financial transition plans

project budgets and
managed throughout projects
expenditure forecasts
with respect to the costs of the

project
cost management plans
and strategies
How problems and issues with

respect to costs were identified
cost management plans
and strategies
and addressed
How projects were reviewed

with respect to costs
records of project
finalisation activities and
disposal of project assets

project finalisation
reports
How cost management
improvements were actioned

records of cost
management lessons
learned
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3.5 Assessment Activities
Element 1
Assessment Activity: Estimating Project Costs
Develop a project spreadsheet of project costs estimates, using the template provided You will need to
follow these steps:
1
List all project activities
2
Assign all required project resources to the appropriate activities including both variable and fixed
cost resources.
3
Summarise costs by activity
4
Summarise costs by resource
5
Consider miscellaneous costs such as contingencies, administrative costs, communications etc
6
Consult cost estimates from other similar projects
7
Complete the cost estimate
8
Present you preliminary estimate to an expert colleague as a reality check
Demonstrate how you would present this information to stakeholders. In particular, how you would get
approval for your budget.
Element 2
Assessment Activity: Developing a cost management plan
Develop a Cost Management Plan for a project. You may wish to identify the headings for you plan first.
Describe the process by which you are going to get approval for your plan. You will also need to demonstrate
that you have researched and applied the policies and procedures that are in place including control and
audit, reports available from the finance system, financial delegations and procedures for obtaining approval
for budget variations. You may wish to refer to the example in this learning guide.
Assessment Activity: Monitoring and controlling costs
Describe the financial management processes and procedures that by which you are going to monitor
expenditure and control costs. Include discussion of how you are going to align financial reporting and
controls to other organisational systems. In particular, consider people issues such as job descriptions,
delegations, training and performance management.
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Element 3
Assessment activity: Project Completion Checklist
Using information in the Learning Guide BSBPM504A Manage project costs as a model to develop your own
project completion checklist for use in your own project. Follow the steps:
Step 1 Assembling documentation
Assemble the following documentation:

Work Breakdown Structure

Progress Reports

Change requests

Any planning documents that established the performance measurement framework

Detailed descriptions of the project’s finished product / deliverable

Contractor correspondence relating to terms and conditions of performance, contract changes
or clarifications

Contract changes

Contractor payment request and tax invoices
Step 2 Inspect to determine completion of (project) phase

Measure, examine and test the deliverables to ensure that results conform with requirements.

Conduct a procurement audit to identify contractor successes and failures.
Step 3 Conduct a project team review
Evaluate agreed major milestones (for example phases and sub-contracts); delivery of major deliverables;
change of key personnel and finalisation of project and other agreed milestones. The records might include:

lists of potential costs

invoice and payment summaries

budgets, commitment and expenditure

cost management plans

reports to a higher authority

recommended and approved courses of action

project and/or organisation files and records
Step 4 Obtain formal acceptance
Obtain formal acceptance, in writing, that the sponsor has accepted the product of the project (phase).
Step 5 Formal acceptance of contractor deliverables

Formally write to contractors formally accepting their deliverables

Update the contractor files
Step 6 Update and archive records

Update project records both paper based and electronic.

Archive records in acceptance with your organisation’s records management policy
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Assessment Activity: Project Completion Evaluation
Questions that you will need to be able to answer to demonstrate your understanding of
reviewing project costs and budget include

How was the project budget developed? How accurate were forecasts and
estimates? How could this be improved?

What procedures and controls were put in place? How effective were they?

How did the project perform in relation to budget? Were there variances
and how were they managed?

Were there any changes to project scope that had cost implications? How
were they managed?

How were project risks managed and what implication did that have for
cost and budget management? How were those issues it managed?

If the project were to be run again, how might costs and budgets be
developed and controlled differently?

Was the Project Sponsor satisfied with the financial reports provided
during the project?

Was the Project Sponsor satisfied with the financial performance of the
project?

Would the team’s performance and the project outcomes be improved by
any additional training activities in regarding financial management?
Some of the cost and budget related questions that might be posed include:

What improvements can you suggest that would assist in how future
project costs and budgets are established and managed?

Were you satisfied with your level of involvement in the project?

Were you always kept informed of the project’s successes and failures?

What part did you play in the decision making processes?

Was the project team appropriately skilled in relation to managing costs
and budgets? What additional training may have been helpful?
Assessment Activity: Personal and organisational learning
 Demonstrate: the process that you would undertake to capture personal and
organisational learning and a framework for a close out report to your management
(including headings and what you would include for each one)
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4. Resources and reference materials
4.1 Project costs proformas and templates
Estimate of project costs
Activity
WBS
Description
Code
Resources required
Duration
Resource
Resource
name & rate
name & rate
Other costs
Total costs
by activity
Resources Matrix i
Activity
WBS
Code
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Description
Amount of Resources required (hours)
Contractor
A
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Test Lab
Statistician
Engineering
advice
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Resource Usage Chart
Test lab time required
Week 1
Task 1
Week 2
10
Task 2
Task 3
20
20
40
20
30
10
30
40
30
80
130
10
20
TOTAL
10
20
Task 4
TOTAL
Week 3
Overall project budget :
Project Budget for ……………………………………………
Cost category
Direct Labour
Detail
Cost
Total
Project manager: 600 hours @ $45 per
hour
27,000
Project team A: 600 hours @ $35 per
hour
21,000
Project team B: 200 hours @ $60 per
hour
12,000
Indirect costs @ 40%
60,000
24,000
Other Direct costs
Materials
3,000
Travel
5,000
Contractors
Contingency
17,000
Total
17,000
23,000
TOTAL PROJECT COSTS
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Budget Expenditure plan
Budget Spending Plan
Activity
Account
Budgeted
Budgeted
Budgeted
(WBS)
code
January
February
March
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Budgeted etc
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Project Budget Format1
Project Budget Format
Notes:
Column A is the high level work breakdown for the project. It is a good idea to have to have your budget follow the same format as the project schedule's high level work
breakdown to ensure that all the costs associated with executing all the project tasks. This column can have another level of indented detail if needed for smaller projects,
and will most certainly have more detail for larger projects to ensure an accurate bottom-up costing is accomplished.
The non-salary labor column is used to show where contractors are required.
The labor columns especially can be driven by an underlying breakdown by person or group of resources.
Salary Labor
Non-salary labor
Material Cost
Work breakdown
Travel
Training
Capital
Other
Totals
Phase 1
0
0
0
0
Phase 2
Phase 3
0
Phase 4
0
0
0
TOTALS
1
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0
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0
0
0
0
4.2 Further references
4.2.1 General references
Baker, S. The complete idiot's guide to project management, (2nd edition), Alpha
Books, Indianapolis, IN.
Davidson, J. P. 2000, 10 minute guide. Project management, Macmillan, Indianapolis,
IN.
Dobson, M. S. 2002, Streetwise project management: how to manage people,
processes, and time to achieve the results you need, Adams Media Corp, Avon, MA.
Greer, M. 2002, The project manager’s partner: a step-by-step guide to project management,
(2nd edition)American Management Association, New York.
Hartley, S. 2003, Project Management A Competency Based Approach, Pearson
Education Australia, Sydney
Heerkens, G.R. 2002, Project Management, McGraw Hill, New York.
Martin, P. 2001, Getting started in project management, Wiley, New York ; Chichester
[England].
Portny, S. E. Project Management for Dummies, Wiley Publishing, New York.
Wren, A. 2003, The project management A-Z: a compendium of project management
techniques and how to use them, Gower. Burlington, VT.
Young, T.L., 1999, The Handbook of Project Management: A practical Guide to
Effective Policies and Procedures, Kogan Page, London
4.2.2 Web references
Australian Computer Society - Project Management Special Interest Group
www.acs.org.au/nsw/sigs/index.html
Australian Institute of Project Management www.aipm.com.au
Gantthead www.gantthead.com The online community for Project Managers. White
papers, directories and links
Project Management Institute http://www.pmi.org/info/default.asp
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UK Government, Office of Government Commerce, Successful Delivery Toolkit
www.ogc.gov.uk/sdtoolkit/reference/ogc_library/partner_guidance/prog_projmgt/in
dex.html
www.projectconnections.com : Practical project know-how for people managing
projects and teams. Users gain the wisdom of experts and project management
professionals in just minutes from extensive collection of how-to bundles,
downloadable templates, problem solving guides and references.
www.projectmanagement.tas.gov.au : This site is the project management website
for the Tasmanian State Government. It contains free information on the Tasmanian
Government's project management guidelines, templates, fact sheets, faqs, glossary
and knowledge base. Project management is a formalised and structured method of
managing change, and this website provides information and tools all project
managers, project officers and committee members may required to effectively
manage or participate in a project."
www.projectsmart.co.uk Project Smart is the Internet based project management
resource that helps managers at all levels to improve their performance. This site
provides an important knowledge base for those involved in managing projects of all
kinds. With regular updates, it keeps you in touch with the latest project
management thinking.
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4.3 Key terms in Cost Management
The introduction to this Kit of materials contains a comprehensive glossary.
Particular terms that relate to cost management are provided below:
Accepted
The recorded decision or formal sign off by the customer, that an
output or sub-output has satisfied the documented requirements and
may be delivered to the customer or used in the next part of the
process.
Accountable business
Provides the business rationale for undertaking the project, showing
case
that it represents value for money.
Action Plan
A plan that describes what needs to be done and when it needs to be
completed. Project plans are action plants.
Activity network
A diagram that shows the workflow, milestones and task
interrelationships of a project.
Analogous estimating
top down” estimating which involves using the actual costs of a
previous similar project to make an estimate for a planned project
Assumptions
Factors related to a project that affect the environment within which a
project is being implemented and which are taken as being true or
correct for the project to be successful.
Authorised
The recorded decision that a deliverable or output has been cleared for
use or action after having satisfied the quality standards for the
project.
Baseline Plan
The initial approved plan to which deviations will be compared as the
project proceeds.
Bottom up estimating
estimating the cost of individual activities and rolling these up to
determine project costs
Close out
Tasks involved in closing down a project, including dealing with
staffing matters, redistributing project infrastructure, debriefing the
project team and others and celebrating achievements.
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Constraints
Factors or things that may impact on a project in some way, usually in
terms of limiting or prescribing its direction or development.
Consultant
An organisation or individual contracted to provide high-level
specialist or professional advice to assist decision-making by agency
management. The consultant will be expected to exercise his/her own
skills and judgement independently of the agency.
Consultation
Systems set up to facilitate communication between project
mechanisms
stakeholders.
Contract
A mutually binding agreement which obligates one or more parties to
provide goods or services in exchange for payment from one or more
separate parties.
Fixed budget
taking the total amount of money available to the project and dividing
estimating
it across project components to ascertain what you can and can’t
afford
Project budget
A detailed, time phased estimate of all the costs of resources required
for your project
Time phased budget
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Appendix 1
BSBPM504A Manage project costs
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