Sunday, June 8, 2008

The Project Cost Change Control System

The cost change control system is one of the tools you can use to control project costs and ensure the project comes in on-budget. It outlines the procedure that is followed to make changes to the cost baseline. You can incorporate it into the integrated change control system to coordinate changes across the entire project.

The cost change control system is important to the cost control process. It helps the project management team by:
  • guiding the team as they make decisions about changes to the budget
  • making all changes auditable and traceable
  • ensuring that incorrect or unapproved changes won't be reflected in the cost baseline.
Each change control system within a project plan is initiated by a change request, whether it is for the budget, the schedule, or for contracts your organization holds with its suppliers. Stakeholders must present a fairly compelling argument in the request why the proposed change must be made.

Once a change request is submitted, the steps of the cost change control system are followed to determine whether or not the cost baseline will change as a result of the request. The cost change control system involves five steps. Companies use this procedure to ensure that all change requests are properly dealt with and that only approved changes are reflected in the cost baseline. The steps in the procedure are listed below.
  1. Receive the change request. The change request is initiated in the form of an oral, written, or electronic request. The person making the request can be either internal or external to the project. The requested change can be optional or legally mandated.
  2. Record the request. The specifics of the change request are recorded, usually in a change request log, so that the request can be managed. The level of detail is up to project management. Enough information should be recorded so that anyone related to the project can understand the request.
  3. Assess the request. Someone on the project team assesses the impact that the proposed change will have on the rest of the project. Budget changes can potentially affect time, cost, quality, and objectives. You have to do a cost/benefit analysis of the change.
  4. Make a recommendation. Based on the assessment, the assessing team member or members make a recommendation to accept, reject, or modify the change request. The recommendation is presented to the project authority.
  5. Decide whether to accept or reject the request. Based on the recommendation, the project authority decides what to do with the request. If rejected, the change request is closed and the documentation is filed. If accepted, the project budget is adjusted accordingly to incorporate the approved change.
If the change is accepted, the project continues according to the revised project plan. Performance continues to be monitored against the modified cost baseline.

Notice the pattern that is evolving. Change requests and the cost baseline were inputs to cost control. The cost change control system is a tool that uses these inputs to produce an output—a change to the cost baseline.

1 comment:

Unknown said...

Well said, thank you