Cost Projection Statement and Analysis

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Stating 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 of costs is a tool of project cost planning and management to identify, estimate and describe total cost 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, cost projection estimates and spreadsheets are used to develop the project charter. They are developed with help of project costing 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 cost projection 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 project cost planning and management. A stated cost projection spreadsheet is the foundation for estimating the total cost of the project and establishing the initiative for project management and for budgeting project activities using project costing 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 project initiation phase, cost projection analysis is to be conducted using project costing software to determine the project approval process and oversight levels. Here are the key steps of the analysis:

• Identify costs for project development. At this step of cost projection analysis, project 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.
• 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.
• 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 project cost planning and management. A high-level description of the overall project cost will be required for the experts.
• Identify costs for ongoing maintenance. Once an independent judgement 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 cost projection 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 (project costing software is required). As a rule, the need for a deeper cost projection 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 costs 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 project cost planning and management, this document should be relatively brief and contain total cost of project development, implementation and maintenance.

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