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Definition: The cost management plan describes how cost variances will be managed (e.g., different responses to major problems than to minor ones). A cost management plan may be formal or informal, highly detailed or broadly framed, based on the needs of the project stakeholders. It is a subsidiary element of the project plan.

Acceptance Level:  Generally accepted

Alternative or Related Terms: Cost estimating

Application Areas/Intended Uses: The cost management plan is an output of the cost estimating process.

Chief Advantages: The cost management plan reflects all of the information fed into the cost estimating process and provides an agreed-upon method of dealing with differences between budgeted costs and actual costs of a project activity.

Additional Reading:
Estimating to Minimize Loss. Ken West. PM Network, April 2001, 42-45.
Negotiating Realistic Estimates. George Pitagorsky. PM Network, August, 2000, 53-56.
Secrets to Creating the Elusive “Accurate Estimate.” Neal S. Gray. PM Network, August 2001, 54-57.
The Price Is Not Always Right. William T. Pepoon. PM Network, May 1999, 53-55.
True Estimates Reduce Project Risk. Mark R. Durrenberger. PM Network, May 1999, 45-48.
Why Chris Can't Estimate. [Practitioner Q & A] William R. Duncan. PM Network, October 1999, 25-26.
You Can't Negotiate Cost. Mark Durrenberger. PM Network, September 2000, 65-66.