Estimating Profit

Once the project manager has determined the resources he or she will be using on the project and against which WBS tasks, it becomes necessary for that project manager to calculate the selling rate for each resource being used on the project. It is logical to assume that the project manager cannot sell the resources at the same price the company does, and a suitable markup needs to be applied against each resource type. Some issues that need to be considered before adding values to any resource include the following:

• The project manager should ensure that he or she has the latest resource rates from the human resource department or consultant manager (e.g., Java developer costs $90.00 per hour—burdened).

• The project manager should ensure that he or she has obtained the costs of hardware and software and has determined the company markup rate for these items (e.g., the markup on software will be 15 percent in addition to the price from which it was obtained).

• The project manager should determine which resources are due for salary increases, which can affect the project rates.

• The project manager should obtain the markup rate or percent from the finance department.

• To calculate the gross margin of the project, determine the difference between the selling rate and the direct cost to company, less disbursements.

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