The Cost Manager: Who’s in Charge of Project Costs?

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In Project Cost Management and the 4-Step Cost Management Process, we looked at what cost management is and the essential elements for implementing cost management into your organization. In this article, we look at the key players in cost management and what their roles entail.

Within companies, the search for efficiency in cost management as well as the development of cost management methodologies have led organizations to professionalize this field. In order to manage project costs well, the challenge is to understand the company’s environment as well as the different stakeholders. This often falls on the shoulders of the cost manager, the central liaison between project, finance, and management teams.

What is a Project Cost Manager?

Cost is always at the forefront of projects, especially when the project’s outcomes are determined by its financial success. Who then is responsible for monitoring and controlling the project’s costs? That’s right, the Cost Manager. They are the link between the project, financial, and management teams.

Cost Managers’ roles and responsibilities include:

  • Planning and forecasting the project budget.
  • Ensuring the project complies with financial regulations.
  • Monitoring and reporting on the progress of the budget.
  • Overseeing project cost management strategy and aligning with the organization’s financial requirements.
hand dropping a coin into a piggy bank

Who Supports the Cost Manager?

There are several functions of cost management within projects and companies. Depending on the information sought, the input data can be delivered by different key players. Similarly, those responsible for input data and those interested in cost analyses may vary. Let’s take a look at each to understand how these roles interact with the cost manager and how they support the project.

  • Finance/Accounting: We often find the project controls, accounting, and financial management teams play a key role in cost management. Although not integrated directly into the project, these are important support functions found in all large companies. They must ensure visibility of a company’s profits and help optimize costs. In projects, they often provide input data (expense file, order status or any other file likely to detail the project expenses) to the cost manager. They are also the guarantor of the input data although not always involved in the project reports.
  • Subject Matter Experts: these are generally technical experts who support defining the budget. They provide all the operational elements to the PMO as well as justifications for budget variances; they monitor implementations, orders, and even the schedule. They are regularly interested in and recipients of financial reports. Some organizations have a Cost Estimator role, which is becoming a more widely recognized skill and is useful for larger projects and programs.
  • Purchasing: This is a function that is not necessarily integrated into the project. Their objective is to validate, control, place, and track orders. They are an interface for all questions relating to contracts and purchase orders. They are rarely concerned with the project reports; however, they may be interested in information concerning contingencies on orders.
  • Project decision-makers: These are often project/program or company departments. They rarely provide input data, but they are often the source of the project objectives. Therefore, they are the main recipients of reports produced by the cost manager that can help them in their decision-making.
  • Sponsors: These are people who support projects. They ensure that the means are well committed to the success of the project. They can give the directions, needs and gains generated by the project. Most of the time, the sponsor is also a decision-maker, so they are one of the key recipients of the cost manager’s reports.
  • Stakeholders: These are people or functions that revolve around cost management and with whom interactions are more or less frequent. We can find the scheduling or risk functions, the centralized functions of project management. They may occasionally be recipients of reports.
  • Project Manager/Project Management Office (PMO): They are responsible for the overall management of the project, which includes cost, scheduling, and risk management. They write and present reports showing progress along the project to the project management, sponsors, and decision-makers. The cost manager helps to prepare these reports.

Now that we’ve looked at the environment and the different stakeholders who interact with the cost manager in a project, let’s look at how cost management is carried out within a company.

women discussing cost management

How Enterprise Cost Management affects projects and what the Cost Manager can do about it

As we outlined in our first article, all organizations must follow certain “rules” or financial regulations, which are then translated by the company and passed down to the project team. These are the rules that will define the cost reporting structure as well as the processes used by the organization.

How then does the organization’s cost strategy affect projects? And how does the Cost Manager keep projects in line with the company’s financial expectations?

The cost manager uses a set of tools and methods to plan for, follow, and update the budget throughout the project lifecycle. It’s a constant effort to understand where the project is financially, what is expected, and how to stay on track with those expectations. 

This becomes challenging when changes take place, and cost is usually at the forefront of change. For example, if a business encounters a financial set-back, they will likely have to reduce project funding. Or if an unexpected event causes a project delay, the additional time and resources needed to recover the project will likely incur additional cost.

Let’s consider the iron triangle of project management: scope, cost, and time. These three constraints impact the quality of a project’s outcome. Therefore, the cost manager is responsible for the cost aspect to ensure the quality is maintained. To do so, they can perform several budgetary exercises, or follow the company’s defined financial processes to manage the project’s budget. The challenge is to quickly understand where the project and the management committees align to ensure effective cost management. 

For this, the majority of companies provide processes and tools. A company often has an enterprise resource planning (ERP) system to manage costs, but at the project level we often find Excel or Google Sheets to process the extractions of the software package.

Regardless of which tools or methods the company chooses, there will always be a focus on keeping costs to a minimum while maximizing output, which the Cost Manager facilitates. Even for companies who take an Agile approach, the financial outcome of projects matters. Their “iron triangle” may be inverted to fix time and cost while incrementally delivering on scope; however, the end result must meet stakeholder expectations and project delays can still occur, both of which inevitably impact cost.

Conclusion

Good cost management is essential for any organization and/or project, regardless of their size. Whether your team consists of a single cost manager or an entire team, their roles allow your company to control your budgets and to anticipate any deviations that could occur.

In this article series, we have reviewed what cost management is, what types of costs exist, what the different phases of cost management are, and finally who the key players are in managing costs. We hope that this allows you to better understand the concepts of cost management and apply them in your company or projects. Need help getting started with your cost management? Ask us, and we’ll put you in touch with our cost management experts!

This article series was written by Aurélien CRÔNIER and Mehdi DARD with contributions from Fanny DA SILVA and the MI-GSO | PCUBED Cost Management Community of Practice.

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