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The
Project Group, LLC
We specialize in assisting corporate and government clients in learning to
improve their productivity while planning and executing projects.
Our three-phase approach yields faster, more efficient project initiation,
planning and execution results.
Are you wondering why you did not receive
a May Newsletter?
The Newsletter took a vacation in May so we did not have one to send out.
We are now resuming our monthly distribution.
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Greetings,
Each
month our newsletter delves into a specific step in the phases of
Initiation, Planning and Execution of projects. Our methodology is
applicable to any project in any industry. Our systematic approach to
Project Management is designed to help your company's projects gain
traction quickly, communicate clearly to all
parties and keep them on track to reach a successful conclusion.
We facilitate workshops that jump-start your teams, making sure they know
what they are going to do and validating they have the time and resources
with which to do it.
This newsletter focuses on Process 9:
Determining The Budget
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· How much will
your project cost?
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 When you have
· determined the project scope;
· documented, estimated, sequenced and
scheduled the tasks;
· made sure you have
sufficient resources to complete the work;
then (and only then) are you fully prepared to estimate project costs.
In this
issue we'll talk about basic project costing models, cost estimating
resources and how to represent your project budget.
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· Some Cost Estimating Issues
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· Cost categories may be predetermined by
accountants
· Capital Expenditures may be tracked
differently than Operating Expenditures
· Know your company's financial reporting
process
· Resource unit cost often a source of
contention
· "Construction work" (projects
where the scope is clearly defined) has a better handle on detailed
resource costs
· Technology-bound "Information
work" (projects where defining the scope may be part of the project)
often have difficulty estimating human resource costs
Basic
Cost Categories
· Labor
· Equipment
· Materials
· Travel
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· Sample IT Budget Categories
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OPERATING EXPENSES may include
Labor
Staff
External Resources
Travel
Telecommunications
Software Purchase
Software Maintenance
Hardware Maintenance
Other
Office Supplies
Outside Services
Miscellaneous Expenses
Capital
Expense may include
Processors
DASD
Tape
Printers - High Volume
Network
LAN - based servers
Software
Voice Systems
Plant Maintenance & Renovation/Site Preparation
Other Capital
Click here to see a sample IT budget
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· An Estimate is a guess
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You are expected to commit to. How do you get around this
dilemma!
Qualify
your estimates with a Range.
The American Association of Cost Engineers guidelines suggest different levels
of estimates depending on how they will be used.
1) Rough Order of Magnitude (often considered within the range of -25% +
75%). A ROM is used during project initiation when you're trying to
determine if the project is even feasible. Imagine driving around with
your spouse looking for a new house. When the fences around the swimming
pools get too high and the yachts take up the whole driveway, consider
looking in another neighborhood.
2) Sizing Estimate (± 50%) This estimate could be used when you have a
preliminary design and you know a lot about the requirements of the
project and some of the risks. Though you are in the right neighborhood,
you're still not ready to make any commitments.
3) Preliminary Estimate . When you have detailed
specs, or completed design drawings, you can expect to make estimates
within a range of ± 25%. You ought to have a high level work breakdown
structure (WBS) and some experts to support to costs of these WBS
elements. You are in the right neighborhood and know how many bedrooms
you need and whether or not the driveway will accommodate your 14 ft
yacht.
4) A Definitive Estimate ± 10%. has enough detail to allow you to commit
to doing the work. It is based on a detailed, bottom up plan supported by
the hands-on people who have a stake in the project's success. You know
the brand of stove you want, whether the master bath will have one or two
sinks and the kind of door knob hardware your spouse wants. There is some
wiggle room even within this level of detail.
Senior managers usually want to know costs and they want to know them
right now. You can't make accurate estimates without significant
information and the time to process that information. Using estimate
qualifiers helps you manage expectations and build a case for more time
and an iterative process to arrive at an estimate before you start doing
the work.
To receive our newsletter, click here
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