Cost Drivers

This keeps coming up, so it's either a) important or b) not completely explained in the other material. Could even be both. Here's the question. Usually I answer requests for definition with a question, but here's it starts (thanks to student Y, after they'd done some googlin') upside down:

definition : 'an activity which causes a cost to be incurred'.

based on this;

1. does it mean that an activity which has a high cost relative to others in a project can be called a cost driver? (does high 'own' cost indicate a cost driver)

2. can a cost driver have no cost itself - but cause other costs to be incurred as a result of its occurance?

The definition is OK, but the word "activity" should be expanded to something like "aspect". A requirement, a milestone, an external fact can all be cost drivers – things which cannot be ignored and have a significant impact on the cost.

For example, a financial organisation wants a business application (software) developed for them by a small software company. The work is not technologically demanding but they require it in operation by April 1st. The schedule milestone means that a large team must be assembled to perform the development, and an office must be obtained to house them. The schedule effects the cost of the project and is therefore a Cost Driver.