Cost schedules

It is now time to produce a detailed cost schedule showing weekly or monthly costs over the life of the project. This will provide a more detailed and accurate estimate of costs and will serve as a plan against which project progress can be monitored.

Calculating cost is straightforward where the organization has standard cost figures for staff and other resources. Where this is not the case, then the project manager will have to calculate the costs. In general, costs are categorized as follows.

• StafT costs These will include staff salaries as well as the other direct costs of employment such as the employer's contribution to social security funds, pension scheme contributions, holiday pay and sickness benefit. These are commonly charged to projects at hourly rates based on weekly work records completed by staff. Note that contract staff are usually charged by the week or month - even when they are idle.

• Overheads Overheads represent expenditure that an organization incurs, w hich cannot be directly related to individual projects or jobs including space rental, interest charges and the costs of service departments (such as personnel). Overhead costs can be recovered by making a fixed charge on development departments (in which case they usually appear as a weekly or monthly charge for a project), or by an additional percentage charge on direct staff employment costs. These additional charges or oncosts can easily equal or exceed the direct employment costs.

• t sage charges In some organizations, projects are charged directly for use of resources such as computer time (rather than their cost being recovered as an overhead). This will normally be on an 'as used' basis.

Amanda finds that IOE recovers some overheads as oncosts on direct staff costs Exercise 8.5

although others are recovered by charging a fixed £200 per day against projects.

Staff costs (including overheads) are as shown in Table 8.2. In addition to the commitments in the work plan (Figure 8.7) Amanda estimates that, in total, she will have spent an additional 10 days planning the project and carrying out the post-project review.

Calculate the total cost for Amanda's project on this basis. How is the expenditure spread over the life of the project?

Table 8.2 Staff costs (including oncosts) for Amanda's project team

Staff member

Daily cost (£)

Amanda

300

Belinda

250

Tom

175

Daisy

225

Gavin

150

Purdy

150

Justin

150

Spencer

150

Figure 8.9 shows the weekly costs over the 20 weeks that Amanda expects the project to take. This is a typical cost profile - building up slowly to a peak and then tailing off quite rapidly at the end of the project. Figure 8.10 illustrates the cumulative cost of the project and it is generally this that would be used for cost control purposes.

8.10 The scheduling sequence

Going from an ideal activity plan to a costed schedule can be represented as a sequence of steps, rather like the classic waterfall life-cycle model. In the ideal world, we would start w ith the activity plan and use this as the basis for our risk assessment. The activity plan and risk assessment would provide the basis for our resource allocation and schedule from which we would produce cost schedules.

In practice, as we have seen by looking at Amanda's project, successful resource allocation often necessitates revisions to the activity plan, which, in turn, will affect our risk assessment. Similarly, the cost schedule might indicate the need or

1000 1

Overheads

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Week number

Figure 8.9 Weekly project costs for the IOE project.

Week numbec

Figure 8.10 Cumulative project costs for the IOE project.

Week numbec

Figure 8.10 Cumulative project costs for the IOE project.

desirability to reallocate resources or revise activity plans - particularly where that schedule indicates a higher overall project cost than originally anticipated.

The interplay between the plans and schedules is complex - any change to any one will affect each of the others. Some factors can be directly compared in terms of money - the cost of hiring additional staff can be balanced against the costs of delaying the project's end date. Some factors, however, arc difficult to express in money terms (the cost of an increased risk, for example) and will include an element of subjectivity.

Risk assessment

Cod* Modu* OocM^trtC

Figure 8.11 Successful project scheduling is not a simple sequence.

Activity plan

Cod* Modu* OocM^trtC

Resource allocatk>n Cost schedule

Figure 8.11 Successful project scheduling is not a simple sequence.

While good project planning software will assist greatly in demonstrating the consequences of change and keeping the planning synchronized, successful project scheduling is largely dependant upon the skill and experience of the project manager in juggling the many factors involved.

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Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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