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Cost Control

Projects suffer from a universal law: the first-time, first-use penalty. The concept of the first-time, first-use penalty is that it's next to impossible to accurately estimate the cost of something that has never been attempted.

Information technology is so unique, so multifaceted, and has so many fronts that the constant movement of it variables creates a love-hate relationship for any organization trying to create a software project cost estimate.

When it comes to cost and things that can affect cost, the project manager must consider the risk and ramifications of the first-time, first-use penalty. This universal law can spell disaster for any software project. The longer a project manager goes without at least nodding in the direction of the first-time, first-use penalty, the bigger the pending fall.

Project cost control includes monitoring cost performance, ensuring that only appropriate project changes are included in a revised cost baseline, and informing project stakeholders of authorized changes to the project that will affect costs.

Many organizations around the globe have problems with cost control. A performance review meeting can be a powerful tool to help control project costs. Knowing you have to report on your progress is an incentive for people to perform better. Performance measurement is another important tool for cost control.

There are many general accounting approaches for measuring cost performance, but earned value management is a tool unique to project management.

An excerpt from Project Management Essentials by Deepak Pandey.

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