5 USPS Supplying Practices Process Step 5: Measure and Manage Supply

5-1 Develop, Finalize, and Implement Cost Management Plan

Effective cost management ensures that a project is completed on time and within budget. It serves as the critical link between project performance and budget, as the project enters USPS Supplying Practices Process Step 5: Measure and Manage Supply. Specifically, cost management helps control cost by monitoring the relationships between the earned value (EV) and the AC. EV refers to the budgeted cost of work performed for an activity or group of activities at a given point during the project. Earned Value Management (EVM) is a methodology used to measure and communicate the real physical progress of a project, taking into account the work completed, the time taken, and the costs incurred to complete that work.

A cost management plan supports cost management efforts by identifying the processes and procedures used to manage costs throughout the contract’s life. The pricing analyst is responsible for the development of the cost management plan. The item manager will play a significant supporting role, anticipating possible resources and inventory changes that will influence cost.

A cost management plan ensures:

  • Guidance — the plan guides the CO in determining how cost variances (CVs) are managed and establishes any contingencies for absorbing overages.
  • Consistency — CVs are managed with the same procedures throughout the contract.
  • Control — the CO will analyze any CV before a decision is made regarding administration of the contract.
  • Accountability the plan ensures that decisions about variance are documented and maintained in the contract file, making decisions accountable and auditable.