| Often a Project Manager is evaluated on his or her ability to complete a project within budget. If you have effectively managed the project resources and project schedule, this should not be a problem. It is, however, a task that requires the project manager's careful attention. You can only manage effectively a limited number of cost items, so focus on the critical ones Each project task will have a cost, whether it is the cost of the labor hours of a computer programmer or the purchase price of a cubic yard of concrete. In preparing the project budget, each of these costs is estimated and then totaled. Some of these estimates will be more accurate than others. A company knows what it will charge each of its projects for different classifications of labor. Commodities like concrete are priced in a very competitive market so prices are fairly predictable. Other estimates are less accurate. For instance, the cost of a conveyor system with higher performance specifications that normal can be estimated to be more expensive, but it is hard to determine whether it will be 10% more or 15% more. For an expensive item, that can be a significant amount. So a project budget is composed of the estimated cost, plus the contingency and design allowance, plus any profit. The project manager's job is to keep the actual cost at or below the estimated cost, to use as little of the design allowance and contingency as possible, and to maximize the profit the company earns on the project. |
Managing Costs, Money, and Profits
