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Elements of cost control; feedback control

Short answer

Elements are budget baseline, cost accounting, reporting, variance analysis, forecasting, corrective action, and responsibility. Control systems are open (no feedback) or closed (feedback and correction); project cost control is closed. A feedback loop has sensor measuring actual cost, comparator against budget, and corrective action, repeated until completion.

Describe the elements of cost control, system of control and feedback control system.

Elements of cost control

  1. Cost estimate and budget baseline prepared from the WBS, with cost codes.
  2. Cost accounting: recording the actual cost of each work item.
  3. Cost reporting: regular reports of budget, actual cost, commitments and forecast.
  4. Variance analysis: comparing actual cost with the budget (or earned value) and finding the causes.
  5. Forecasting: estimate at completion (EAC) and cash needs.
  6. Corrective action and change control: actions to reduce cost, or an approved change in the budget.
  7. Responsibility and authority: each cost centre has an accountable person.

System of control

A control system can be:

  • Open system: there is no feedback; the output is not compared with the target, so errors are not corrected automatically (e.g. a fixed monthly allocation made without checking progress).
  • Closed system: the output is measured and fed back, compared with the target and corrected (e.g. a monthly comparison of actual cost with the budget). Project cost control is a closed system.

Feedback control system

Input --> [ Process: project work ] --> Output (actual)
                    ^                     |
                    |                     v
          [ Corrective action ]   [ Sensor: measure actual ]
                    ^                     |
                    |                     v
                    +-------------[ Comparator: actual vs plan ] <-- Plan / standard (budget)

The sensor measures the actual cost, the comparator finds the variance against the budget (the standard), and the manager (effector) takes corrective action on the work. The result of the action is measured again, so the loop keeps the cost close to the budget. Feedback should be quick and accurate; a long delay in reporting weakens control.

✓ Answer checked by Claude Opus 5.5 (high effort)

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