**5. Cost management**

*Operations Management - Emerging Trend in the Digital Era*

should the client request changes in the original project plan.

scope and its management.

and clarifying specific deliverables.

As stated earlier, projects are characterized by unknown factors and ambiguity, which delay the detailed development of scope and specifications to later stage of the project. Consequently, the scope of the project continually changes throughout the project. Sometimes, the original objective of the project may also change as the project progresses and we learn more about what is needed, what is possible, and what the costs are going to be. All these changes will impact on the project

Despite these changes, a clearly defined scope is crucial to developing a project plan, which provides a baseline for managing the schedule, the budget, and the detailed work of the project. Without a clearly defined scope, we have no basis for tracking progress on the project as defined or for altering schedule and cost criteria

Once a project has been initiated, the project manager and an early-stage project team begin scope management by creating a preliminary scope statement based on the project charter. The preliminary scope statement formalizes between the project and its customer an agreement regarding quantifying project/product objectives

While the preliminary scope statement sets objectives at a higher level of abstraction, these objectives must be defined in as much detail as possible before explicit schedules, budgets, and work plans can be developed during the planning phase of the project management life cycle [9]. At this point, historical information and expert opinion are applied within the constraints and assumptions of the present project to create a body of requirements necessary for guiding project execution. This body of requirements is the foundation of scope definition, which subdivides the major project deliverables into smaller, more manageable components. It is important to translate requirements of the client into specifications, which denote finality and clear definition of project outcomes with specific quality parameters and measures. This preliminary scope statement document sets various product performance criteria, delineates the initial project organization, boundaries, assumptions and constraints, while providing a high-level WBS and order of magnitude cost estimates [2, 6]. Below is an example of deliverable-oriented WBS (**Figure 1**).

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**Figure 1.**

*Deliverable-oriented WBS.*

WBS identifies all project activities to be executed but it does not include estimates of time, resources, or project costs. WBS should be initially developed at a higher level and expanded to include more specifications as you incorporate additional requirements of the project. As a next step, you will develop first two or three levels of the WBS, which essentially contain deliverables. These higher-level work elements are broken down into smaller and smaller work packages so that you can have manageable tasks to complete at any given point in the project [6]. The work package list is both inclusive and exhaustive. Preferably, these tasks should be at level 3 or lower. Remember that a good WBS encourages a systematic planning process, reduces the possibility of omission of key project work elements, and simplifies the project by dividing it into manageable units.
