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Cost Projection Statement and Analysis

Eric McConnell
November 17, 2010
6,466 views

Financial investments for project development

Cost Projection Statement and AnalysisStating cost projection is an activity carried out during the project initiation phase to identify costs for development, implementation and maintenance of the project. The analysis intends  to identify, estimate and describe total expenses of project management initiative. Cost projection statement and analysis are required activities that allow making the project estimated and well-grounded in financial terms. Among other tools, estimates and spreadsheets are used to develop the project charter. They are developed with help of PM software.

Cost Projection Definition

Cost Projection is a statement of financial investments for project development, implementation and maintenance to establish the project initiative and make the project fully operational. Financial investments cover the cost of all procurements, leases, payments of all applicable taxes, and purchases of hardware, software, training & tutoring services, internal/external project resources, installations. In addition, the statement includes a separate cost projection spreadsheet that represents operational cost estimates for project maintenance and operations and covers the entire project lifecycle, from the initiation phase through delivery of the project’s outcomes.

Stating cost projection is an important step of planning and management. A stated cost projection spreadsheet is the foundation for estimating the total expenses of the project and establishing the initiative for project management and for budgeting project activities using PM  software. It is also used as the primary source of information for making finance-related decisions and conducting initial project planning.

Cost Projection Analysis

During the initiation phase, cost projection analysis is to be conducted using PM software to determine the project approval process and oversight levels. Here are the key steps of the analysis:

1. Identify expenses for project development

At this step, finance planners identify an amount of finance required for developing the project. This amount shows when the resources will be needed. It should be linked to stated project deliverables.

2. Estimate costs for project delivery

Finance planners need to create a cost projection spreadsheet template that shows all financial resources required for completing all necessary work and producing all desired deliverables of the project.

3. Create a high-level description of the project costs

Once a sample cost projection spreadsheet is developed, it should be reviewed and approved by external experts who analyze project feasibility, stated project funding and business case to produce suggestions and recommendations for improving ongoing planning and management. A high-level description of the overall project expenses will be required for the experts.

Identify costs for ongoing maintenance

Once an independent judgment on project cost management and planning is obtained and necessary recommendations are considered, the next step in cost projection analysis is to determine and estimate costs required for maintaining the project activities and operations after the development effort has been accomplished. All this is about operational & maintenance costs that should be estimated and added to a cost projection spreadsheet example.

The  analysis steps are applicable to most projects. Meanwhile, each of the steps can be specified and broken down into simple tasks, so that a more detailed analysis of project finance can be conducted (job costing software is required). As a rule, the need for a deeper   analysis appears when a project is complex and requires more human and material resources. Then initial project cost management and planning will focus on identifying and estimating expenses per project phase (Initiation, Planning, Execution etc.) or per sub-project (software acquisitions, staff training, development, testing etc.).

At the same time, cost projection analysis is the initial attempt to estimate project costs and intended for creating a simpler and easy-to-understand picture of project costing, so a cost projection sample document should not be too overloaded with numbers and calculations. As a result of initial  cost planning and management, this document should be relatively brief and contain total value of project development, implementation and maintenance.

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