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CHAPTER 5.2

SOFTWARE SUPPORT
FOR COST MANAGEMENT

We noted in the introduction to this section that software support for project
budgeting and cost control is usually weaker than support for the other
project management functions. This is deliberate. One reason is that each firm
has its own, very specific, way of handling things that fall under the domain of Fi-
nance. Another reason is that this domain of Finance is usually somewhat isolated
from the other functions. While I understand the reasoning behind this thinking,
I feel that it doesn’t have to be that way.

Here’s just one example of the problems with isolating the cost elements of the
projects from the other parts. This is a true story. A major power systems manu-
facturer was involved in several large turnkey projects. On the 4th floor of an ad-
ministration building, a team of 40 people was involved in implementing project
control, using a respected CPM product, in a minicomputer environment. They
were issuing monthly reports on a project, noting that the progress was not keep-
ing up with the plan.

On the 6th floor, the Finance Group was accumulating costs on the project.
These costs were compared to the budget and cash flow plan. About halfway
through this project, they noted that, financially, things were in good shape.
Their data indicated that the cash flow plan called for the project to be about
50 percent expended, and that they had charged only 45 percent of the costs,
thus far.

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