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Limitations of cost management in project management
Brief review of project cost management
Limitations of cost management in project management
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Recommended: Limitations of cost management in project management
Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project: Direct Costs These costs are on account with a specific work package. Direct costs are attributed to efforts made by the project manager, project team, and folks executing the work package. These costs signify actual outflow and are compensated as the project evolves. Examples of direct costs are labor, equipment, materials, and other (Gray & Larson, 2005). Direct Overhead Costs Direct overhead rates represent which resources are being used in a project. Direct overhead costs relate to project deliverables. An example is the salary of the project manager or the rental of a project workspace. While overhead is not an immediate expense, it must be remunerated (Gray & Larson, 2005). General and Administrative (G&A) Overhead Costs These costs are not straightforwardly associated to a project. Examples include organization costs such as advertising or accounting. G&A costs are generally billed as a percent of total costs, or items such as labor, materials, or equipment. Using the sums of direct and overhead costs for work packages, it is possible to cumulate the costs for any deliverable for the entire project (Gray & Larson, 2005). Figure 1. Primary Data Sets Used by the Team to Determine the Budget Type Description Amount Cost of the Software Depreciation can be taken. G&A Cost 450,000 Training Costs Training for 12 users. Training time is 2 days per person. 6720 In-House Training Support Administrative Costs for 2 vendors in house 2800 Total Training Costs 9,520 Equipment and Material Costs Purchase of three servers and backup software 3750 4500 8250 Labor Costs Average salary = $91 Programmer 40 3640 Database Manager 65 5915 Project Analyst 150 13650 Operations Analyst 20 1820 Interface Manager 20 1820 Network Analyst 10 910 27,755 Total Cost 495,525 At the beginning of any project, a project manager along with the management team will create an estimate of time and costs, which will lead to the initial approved budget amount. As most project managers know, "Past experience is a good starting point for developing team and cost estimates.