Chapter 7 BUDGET. Every project has costs, including direct costs, indirect costs, sometimes capital cost, always expense cost. Cost management on a project is generally done partially by the project team and partially by people in other departments. In this chapter we discuss many aspects of project cost management. | Chapter 7 BUDGET Every project has costs including direct costs indirect costs sometimes capital cost always expense cost. Cost management on a project is generally done partially by the project team and partially by people in other departments. In this chapter we discuss many aspects of project cost management. Cost management encompasses estimation and tracking of costs as well as cash flow and other economic concepts. We discuss cost control and other aspects that are project related. Also we discuss building cost contingency into the project budget. One very important concept related to cost is Earned Value. This concept is covered separately in Chapter 11 because it is a project management concept that links the budget to the schedule and hence is not strictly a financial concept. Some PM s never have to address financial issues but for others it is a critical part of the job. In telecom even during the good years finances have been a critical component of projects. In fact the financial aspects have been so critical that not only are project managers required to estimate get approval for track and justify all of their project costs but many cost items are calculated and reviewed by financial departments as well. Engineering Economics departments exist to work the numbers for major investments such as network upgrades new services new products maintenance etc. And since so much of the telecom environment had traditionally been regulated very precise and careful methodologies were adopted for calculating the costs. Every cost the company incurred was tracked and assigned to an appropriate category. Even today when the level of regulation has significantly decreased companies are still extremely cost conscious and extremely careful to manage all costs professionally. Therefore for many projects Engineering Economics will be involved. Someone from the 134 Budget Engineering Economics department might be a member of the core project team or the department might be
