Project Management guide · Cost and resources
Cost Control in Project Management: Process and Techniques
Cost control is the ongoing process of monitoring project spending against the cost baseline, analysing variances, forecasting the final cost and acting to keep the project within budget. It is about understanding performance, not just counting money spent.
Key takeaways
- Cost control compares value earned with money spent, not just spend with budget.
- CV, CPI, EAC and TCPI tell you where you are and where you will finish.
- Agree thresholds in advance so action is triggered early.
- Change the baseline only through formal change control.
What cost control involves
- Recording actual costs, including internal labour from timesheets.
- Measuring the value of work completed using earned value.
- Calculating variances and indices: CV, SV, CPI and SPI.
- Forecasting the estimate at completion.
- Deciding on corrective or preventive actions.
- Raising change requests when the baseline can no longer be met.
- Reporting to stakeholders in the status report.
The cost control process
- Collect actual costs and progress for the reporting period.
- Calculate planned value (PV), earned value (EV) and actual cost (AC).
- Work out cost variance (EV - AC) and the CPI (EV / AC).
- Compare the results with agreed control thresholds.
- Find root causes for significant variances.
- Forecast the final cost and check the to-complete performance index.
- Agree and record actions, and follow up in the next period.
Worked example
BAC is $200,000. At month four: PV = $80,000, EV = $70,000, AC = $85,000. The threshold is a CPI below 0.95.
| Measure | Calculation | Result |
|---|---|---|
| Cost variance | 70,000 - 85,000 | -$15,000 |
| CPI | 70,000 / 85,000 | 0.82 (breaches threshold) |
| EAC | 200,000 / 0.8235 | about $242,857 |
| TCPI to meet BAC | (200,000 - 70,000) / (200,000 - 85,000) | 1.13 |
A TCPI of 1.13 means the remaining work must be done 13% more efficiently than planned to finish on budget, which is unlikely when current efficiency is 0.82. The project manager investigates, finds rework caused by unclear requirements, and agrees a fix plus a change request for extra funding.
Corrective actions
| Action | Effect |
|---|---|
| Fix the root cause (e.g. requirements, defects) | Improves efficiency for remaining work |
| Reduce or defer scope | Lowers remaining cost, needs approval |
| Change the resource mix | Lower rates or more experienced people |
| Renegotiate supplier terms | Lowers bought-in costs |
| Use contingency reserve | Covers risks that have occurred |
| Request more budget | Changes the baseline through change control |
Common mistakes
- Comparing spend with budget without measuring progress.
- Waiting for finance month-end figures that arrive weeks late.
- Ignoring committed costs, such as signed purchase orders.
- Moving the baseline to hide overruns.
- Taking action on symptoms instead of root causes.
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Frequently asked questions
What is cost control in project management?
Monitoring spending against the cost baseline, analysing variances, forecasting the final cost and taking action to stay within budget.
What is the difference between cost control and cost management?
Cost management covers planning, estimating, budgeting and control. Cost control is the monitoring and correcting part.
What is the main tool for project cost control?
Earned value management is the most widely used because it combines scope, schedule and cost.
What does a CPI below 1 mean for cost control?
The project is getting less than a dollar of planned work for each dollar spent, so it is over budget for the work done.
What are control thresholds in cost control?
Agreed limits, such as CV beyond 10% or CPI below 0.95, that trigger investigation or escalation.
How often should cost control reviews happen?
At least monthly and ideally weekly or every sprint, so problems are caught early.
What is a committed cost in cost control?
Money already promised, such as a signed purchase order, but not yet paid. It should be included when forecasting.
How does cost control bring an over-budget project back on track?
Fix the root cause, reduce or defer scope, change the resource mix, use contingency or formally request more budget.
What is TCPI in cost control?
The to-complete performance index: the cost efficiency needed on remaining work to finish at a target, (BAC - EV) / (BAC - AC).
How does cost control work in Agile projects?
Yes. Agile teams often have a fixed cost per sprint, so they control cost by prioritising the backlog and tracking value delivered.
Who is responsible for cost control?
The project manager, supported by control account managers and finance, with the sponsor approving changes to the budget.