Project Management guide · Cost and resources
Cost Management Plan: What to Include, With a Template
A cost management plan describes how a project's costs will be estimated, budgeted, managed, monitored and controlled. It is a component of the project management plan and sets the rules everyone uses when dealing with money on the project.
Key takeaways
- The cost management plan sets the rules for estimating, budgeting and controlling costs.
- Define units, precision, thresholds, earned value rules and reporting.
- Agree reserves and approval authority up front.
- Keep it concise and review it when the project changes.
What to include
| Section | Content |
|---|---|
| Units of measure | Currency, and units for effort such as hours or days |
| Level of precision | How estimates are rounded, e.g. to the nearest $100 |
| Level of accuracy | Acceptable ranges and how much contingency is allowed |
| Organisational links | How control accounts relate to the WBS and finance codes |
| Control thresholds | Variances that trigger action, e.g. CPI below 0.95 |
| Performance measurement rules | Earned value methods and how progress is credited |
| Reporting formats | Reports, frequency and audience |
| Reserves | How contingency and management reserves are held and released |
| Roles and approvals | Who can spend, approve and change the budget |
| Funding and cash flow | How and when money is released |
Template outline
- Purpose and scope of the plan.
- Roles and responsibilities, including financial authority levels.
- Estimating approach and tools.
- Budgeting approach and cost baseline.
- Reserve management.
- Performance measurement and earned value rules.
- Variance thresholds and escalation.
- Reporting and review schedule.
- Change control for the cost baseline.
- Approval.
Example extracts
- Units: costs in US dollars; effort in person-hours.
- Precision: estimates rounded to the nearest $100.
- Progress credit: tasks under two weeks use 0/100 (credit only when complete); longer tasks use 50/50.
- Thresholds: CPI or SPI below 0.95 or above 1.10 is reported to the sponsor with a cause and action.
- Reserves: project manager may use contingency for listed risks; management reserve needs sponsor approval.
- Reporting: weekly cost summary to the team; monthly earned value report to the steering group.
Tips
- Keep it short and practical: a few pages is usually enough.
- Agree the thresholds with the sponsor before the project starts.
- Match finance codes to the WBS so actual costs land in the right place.
- Decide how internal staff time will be costed.
- Review the plan if the project's size or risk changes significantly.
Free templates for this topic
Frequently asked questions
What is a cost management plan?
A document describing how project costs will be estimated, budgeted, monitored and controlled. It is part of the project management plan.
What is included in a cost management plan?
Units of measure, precision, accuracy, control thresholds, earned value rules, reporting formats, reserves, roles and change procedures.
Who prepares the cost management plan?
The project manager, with input from finance, the sponsor and key team members.
When is the cost management plan created?
During planning, before costs are estimated and the budget is set.
What is a control threshold in a cost management plan?
An agreed variance level, such as a CPI below 0.95, that triggers analysis or escalation.
What is a control account in a cost management plan?
A management point where scope, budget, actual cost and schedule are integrated and compared with earned value.
What earned value rules of credit go in a cost management plan?
Rules for crediting progress, such as 0/100, 50/50, 20/80 or percent complete based on measurable milestones.
Is the cost management plan the same as the budget?
No. The plan describes how costs are managed; the budget is the approved amount of money.
Do small projects need a cost management plan?
A short version helps even small projects, so everyone knows how costs are tracked and when to escalate.
How does the cost management plan relate to change control?
It explains how changes to the cost baseline are requested and approved, usually through the project's change control process.
How long should a cost management plan be?
Usually a few pages. Scale it to the size and risk of the project.