How to Cost Plan for a Project

by Bob Turek; Updated September 26, 2017
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Project cost planning involves understanding the elements of a project, the costs of each and how to align resources to take advantage of cost reductions. Labor costs are calculated using labor rates per hour by labor type. Materials costs are added to the project costs. The timing of these costs is determined by a project schedule. Timing of resource use and identifying where project tasks overlap with other projects is important to achieving significant cost reductions on a project.

Step 1

Identify the tasks required to complete a project. Determine which tasks are required to support starting other tasks or task interdependence. Estimate average lead times for the tasks. Identify materials and labor hours required for each task.

Step 2

Schedule the project by back-scheduling from the project due date; consider all interdependent tasks and other tasks using the average lead times. Apply labor hours to each labor type. Determine total labor hours by labor type and total labor hours for the project. Total the labor hours by week and month by labor type.

Step 3

Alter the schedules by considering labor hours available per day for each task and labor hours required. For example, if four hours of a certain labor type are available per day and the project task requires eight hours, then the schedule for the task is two days. Apply the labor rates per hour to the labor types, and determine total cost for the project and by labor type. Add material costs to the project. Determine costs for labor and material per week and month based on the timing of use of labor and material.

Step 4

Consider alterations to the project task schedule that give opportunities to use labor at cheaper rates. For example, a programmer might be needed, but only a senior programmer, at a higher labor rate, is available. If the schedule can be changed to accommodate use of the programmer, then project costs can be reduced. Identify situations where project labor resources are being used on multiple projects and the likelihood that the resource will be stopping and restarting work on the project. Eliminate these stops and starts by rescheduling, using different resources and combining tasks. This eliminates learning costs incurred through extra hours involved with restarting work on projects.

Step 5

Consider other projects that might have tasks, or entire projects, that repeat or overlap with the project. Identify cost savings through elimination of overlapping tasks, integration of projects and cost sharing.

Tips

  • Project management software will make the cost planning effort much easier. Alternative scheduling using different resources will be much easier using automated methods.

About the Author

Bob Turek started writing in 1994 for "The Performance Advantage" magazine. His book "Value Selling Business Solutions" draws on technology industry experiences gained from his position as director of business development for Infogain's cloud CRM for customer support operations practice. He holds a bachelor's degree in economics and psychology from Claremont McKenna College and a Master of Business Administration from the University of Southern California.

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