How Does Cost Management Differ Between Predictive and Agile PMP?

What Are Key Cost Control Differences in Hybrid Project Methodologies?

Compare predictive cost management (strict budgeting, fixed baselines) versus Agile (iterative evaluation, priority adjustments) for effective hybrid projects, crucial for PMP exam prep and real-world budget control.

Question

You are managing a project that requires careful budget management. In this project, the team is using both predictive and Agile approaches, depending on the project phase. As a project manager, you’re asked to explain how cost management differs between these two methodologies. As a project manager, how would you explain the key difference in cost management between predictive and Agile project management methodologies in this scenario?

A. In predictive project management, the costs are estimated at the start and rarely adjusted, whereas in Agile, costs are reviewed and adjusted at the end of each iteration.
B. In predictive project management, costs are controlled through strict budgeting and forecasting, while in Agile, costs are continuously evaluated and adjusted based on changing priorities and iterations.
C. In both predictive and Agile project management, cost management is the same, as costs are fixed and not subject to change throughout the project.

Answer

B. In predictive project management, costs are controlled through strict budgeting and forecasting, while in Agile, costs are continuously evaluated and adjusted based on changing priorities and iterations.

Explanation

In predictive (Waterfall) project management, cost management follows a structured approach where detailed estimates form a fixed cost baseline early in planning, with strict change control processes, variance analysis via earned value management, and forecasting to maintain budget adherence throughout sequential phases. Agile cost management, conversely, embraces iterative cycles where costs are monitored per sprint through velocity-based burn-down charts and value delivered, allowing reprioritization of backlog items within fixed timeboxes and team capacity to adapt to evolving requirements without rigid baselines. This key difference supports predictive’s emphasis on upfront predictability in stable environments versus Agile’s flexibility for dynamic changes, ensuring value maximization in hybrid projects by applying the right controls per phase.