Costs and Resources - Informatics Project Management

GPI - Gestão de Projectos Informáticos
Project Costs Plan
Maria do Rosário Bernardo

1
Estimate Costs
Steps :
• Estimate activities duration

• Activity resources allocation (resource availability can
change previous activity duration)
• General costs estimating

• Project Budget
• Project Price

2
Estimate Costs
Why to estimate ?
• To control and calculate variances (Cost

baseline)
• To validate Project financial viability
• To determine the fix price proposal
• To obtain funds

3
Estimate Costs
“The purpose of Estimate costs is to obtain an

approximation of the costs needed to complete
each project activity and for the project as a whole.”
“Cost estimates can be expressed in terms of units

of measure such as labor hours or number of
equipment hours or in currency valuations.”
Source: ISO 21500

4
Estimate Costs
When expressed in currency, and when

performance spans a long period of time, methods
taking into account the time value of money should
be used.
Projects dealing in more than one currency should

identify the exchange rates used in costing the
project plan.
Source: ISO 21500

5
Cost Components (1)
Component Description Assigned Cost
Labour Estimated cost for the human = Junior days * rate1

resources needed to execute + Effort Senior days *
project activities rate2
Rates usually include + ….
Overheads

6
Labour cost rates

annual annual daily rate
Month Salary salary TSU direct costs overheads 100% 80%
14 23,75% 500 € 1,5 226 180
1 000 € 14 000 € 17 325 € 17 825 € 26 738 € 118 € 149 €
1 200 € 16 800 € 20 790 € 21 290 € 31 935 € 141 € 177 €
1 500 € 21 000 € 25 988 € 26 488 € 39 731 € 176 € 221 €
2 000 € 28 000 € 34 650 € 35 150 € 52 725 € 233 € 293 €
2 500 € 35 000 € 43 313 € 43 813 € 65 719 € 291 € 365 €
Organization Costs rates by resource category (defined based

on intervals).
Trainee = 100€ day
Consultant Type 1 = 200€ / day
Consultant Type 2 = 250€ / day
Consultant Type 3 = 350€ / day (PM)
7
Cost Components (2)
Materials HW, SW package,… Purchase cost

Equipments Special equipment, tools or Rent costs or
and facilities facilities solely for the project
PM may decide to rent the equipment
Amortization of
as long as it is needed to the project the use value

8
Cost Components (3)
Subcontractors Outsourcing some of the work Outsourcing

price according
payment
conditions
Travel Airfare, hotels, meals, travel Advanced
compensation, … payments,
invoices,…
Administrative / Organizational structure costs Usually
(administrative and support Included as
general staff, sales, marketing, overheads of
communications,
development HW and SW,…) labour costs

9
Cost Components (4)
Management Project manager cost Effort days *

Personnel directed related to rate
project management
Can include a fee derived
from projects support
structures (with direct input to
projects)
Can include the team
members allocation costs to
project planning and control
activities

10
Cost Components (5)
taxes Eg. VAT (IVA) Only if the

organization
cannot deduct it
Inflation Prevent from prices increment In long-term
projects.
Only price review
conditions
Finance costs Bank taxes, loans’ s interests, Taxes
warranties
Contingencies Risk provisions (link to a risk) Only if the PM
Project reserves (x% for a needs to use it
project type)
11
Cost Breakdown Structure - CBS
Project X Project Level:
• provisions (related to risks)
• reserves (related to project type)
Phase i
Cost are reported at WP level ( relate

WP i . j WP with an existant “cost account”)
activity
i.j.n
The costs are estimated bottom-up
 Labour cost
based on activities
 Material Cost
…

12
Cost Breakdown Structure - CBS

PROJECT X
90.000
Project Management
PHASE 1 – 15.000 PHASE 2 – 30.000 PHASE n – 40.000
– 5.000
WP 1.1 – 3.500 WP 2.1 – 10.000
WP 1.2 - 6.500 WP 2.2 – 10.000
WP 1.n - 5.000 Sub-WP 2.2.1 – 7.000
Sub-WP 2.2.2 – 3.000
WP 2.n – 10.000

13
Develop Budget
“The purpose of Develop budget is to distribute the

project’s budget to the appropriate levels of the
work breakdown structure.”
“The assignment of budgets to scheduled segments of

work provides a time-based budget against which actual
performance can be compared”
“The budgets are normally distributed in the same manner

in which the project estimate was derived.”
Source: ISO 21500
14
Develop Budget
Resource Name Type Material Label Initials Group Max. Units Std. Rate
Team Leader Work TL 100% 300,00 €/day
Consultant 1 Work C1 100% 150,00 €/day
Consultant 2 Work C2 100% 200,00 €/day
ACT 1: 2 * 300 + 4 * 150 = 1.200
50%
ID Task Name Duration Total Cost 15 Oct '12 22 Oct '12 29 Oct '12 05 Nov '12 12 Nov '12
M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T
1 WP A 10 days 3.800,00 €
2 ACT 1 4 days 1.200,00 € Team Leader[50%];Consultant 1
3 ACT 2 2 days 600,00 € Team Leader[50%];Consultant 1
4 ACT 3 6 days 1.200,00 € Team Leader[50%];Consultant 2
5 ACT 4 4 days 800,00 € Team Leader[50%];Consultant 2
6 MA 0 days 0,00 € 01-11

15
Resources Allocation - Rules
RAM Activity Effort estimative Alloc
WP
-- X Team members with no WP responsibility must be 100%
allocated in a full time base
X P Must be allocated to explain how to do, check 50%
quality and do the must difficult tasks.
A senior can split his time allocation.
P D/I The cost will be input as management cost
D,d -- Must be allocated to WP activities with decision
results (review / validate / negotiation)
C/A/T C/A/T Must be allocated to “some” WP activities
1. Min activity resource allocation >= ½ day
2. Meetings : all resources with the same allocation
3. Use a uniform model to allocate resources for all WP activities (exceptions will
be done in a 2nd step)
16
Resources Allocation
• Resources – detailed activities assignment
• Assignments 100%; 50%; 20%
ID Task Name Duration

M1 M2 M3 M4
W1 W2 W3 W4 W5 W6 W7 W8 W9 W10 W11 W12 W13
1 Análise 12 d
2 Módulo A 5d Pedro
3 Módulo B 10 d Maria
4 Módulo C 5d Manuel
5 Doc Análise 2d Maria;Pedro
6 Doc Análise Aprovado 0d 18-09
7 Desenho 11 d
8 Módulo A 4d Pedro
9 Módulo B 10 d Maria
10 Módulo C 6d Manuel
11 Consolidar Desenho 1d Manuel;Maria;Pedro;Tiago
12 Doc Desenho Entregue 0d 03-10
13 Desenvolvimento 25 d
14 Módulo A 10 d Manuel;Inês
15 Módulo B 20 d Maria;Tiago
16 Módulo C 12 d Pedro;João
17 Teste Integração 5d Inês;João;Manuel;Maria;Pedro;Tiago
18 Desenvolv Concluído 0d 07-11

17
Verificar Distribuição dos Recursos
Pedro
Histogram

18
Optimizar Distribuição dos Recursos
Assign Manuel
Activities to Pedro

19
Resource Levelling
• Project Management Software Tool allow

automatic resource levelling
• Algorithms use priorities:
– Predefined activities priorities
– Critical path activities
– Longest activities
• Usually optimize durations

20
Nivelar Recursos
Optimized
Pedro
Assignments

21
Optimized Resources Assigments

ID Task Name Total Cost
M1 M2 M3 M4
W1 W2 W3 W4 W5 W6 W7 W8 W9 W10 W11 W12 W13
0 Project1 37.750,00 €
1 Análise 6.000,00 €
2 Módulo A 1.250,00 € Pedro
3 Módulo B 2.500,00 € Maria
4 Módulo C 1.250,00 € Pedro
5 Doc Análise 1.000,00 € Maria;Pedro
6 Doc Análise Aprovado 0,00 € 18-09
7 Desenho 5.750,00 €
8 Módulo A 1.000,00 € Pedro
9 Módulo B 2.500,00 € Maria
10 Módulo C 1.500,00 € Pedro
11 Consolidar Desenho 750,00 € Maria;Pedro;Tiago
12 Doc Desenho Entregue 0,00 € 03-10
13 Desenvolvimento 26.000,00 €
14 Módulo A 5.000,00 € Pedro;João
15 Módulo B 10.000,00 € Maria;Tiago
16 Módulo C 6.000,00 € Pedro;João
17 Teste Integração 5.000,00 € João;Maria;Pedro;Tiago
18 Desenvolv Concluído 0,00 € 09-11
Team : less 2 members

Team members with continuous assignments
Initial : Finish 7/11 » Optimized: Finish 9/11
Lower costs
22
Resources Optimization Steps

• Delay one activity (use floats)
• Define activities priorities
• Resources levelling (don’t need to define precedence's
based on resources constraints)
• Move resources from non critical to critical activities
• If necessary, increase resources (=> increase costs)

23
Resources Allocation
Transversal :
• Project management
• Infra-structures
• All needed to support the execution resources

24
PM Costs
• Project management cost

– PM allocation to PM activities
– PM allocation to review / acceptance activities
– PM allocation for plan and control activities
• Must cover all project duration
• Can be a 100% allocation (depends on team
dimension and/or risk)
• Can be represented by a 1 day / week

25
PM Costs
ID Task Name Duration

19 Mar '12 16 Apr '12 14 May '12 11 Jun '12 09 Jul '12 06 Aug '12 03 Sep '12
11 22 02 13 24 05 16 27 07 18 29 10 21 01 12 23 03 14
1 Gestão do projecto 107 d
2 Arranque do Projecto 4d
3 Preparação do arranque do projecto 219-03
d 20-03
4 Reunião interna de arramque 121-03
d 21-03
5 Workshop de arranque com o cliente 22-03
1d 22-03
6 Termos de referência aprovados 0d 22-03
7 Plano Projecto 2d
8 Elaboração do plano de projecto 1 d23-03 23-03
9 Revisão formal do plano de projecto 1 d 26-03 26-03
10 Plano de Projecto aprovado 0d 26-03
11 Controlo 97 d
33 Contratação 23 d
34 Especificação equipamentos 1d 09-04 09-04
35 Equipamentos encomendados 0d 09-04
36 Entrega Equipamentos 0d 11-05
37 Encerram ento do Projecto 5d
38 Revisão dos objectivos do projecto 1d 14-08 14-08
39 Elaboração do procedimentos de encerramento do projecto
2d 15-08 16-08
40 Feedback à equipa 2d 17-08 20-08
41 Fim do Projecto 0d 20-08
42 Desenho Conceptual 23 d
63 Realização 64 d
86 Preparação Go-Live 22 d

26
Other cost components
• Subcontracts cost
– Base on a daily tax (represent as a normal team resource)
– Fixed price (the costs will be input using project milestones,
according to payment conditions)
• Materials, Equipments, …

27
Resource Name Type Material Label Initials Group Max. Units Std. Rate Ovt. Rate Cost/Use Accrue At
Team Leader Work TL 100% 300,00 €/day 0,00 €/hr 0,00 € Prorated
Consultant 1 Work C1 100% 150,00 €/day 0,00 €/hr 0,00 € Prorated
Consultant 2 Work C2 100% 200,00 €/day 0,00 €/hr 0,00 € Prorated
Equipment Work E 100% 0,00 €/hr 0,00 €/hr 20.000,00 € Start
Task Name Duration Total Cost
WP A 10 days 13.800,00 €
ACT 1 4 days 1.200,00 €
50% MA
ACT 2 2 days 600,00 € 50% MB
ACT 3 6 days 1.200,00 €
ACT 4 4 days 800,00 €
MA 0 days 10.000,00 €
WP B 12 days 10.000,00 €
B1 5 days 0,00 €
B2 5 days 0,00 €
B3 2 days 0,00 €
MB 0 days 10.000,00 €

28
Accumulative costs
Software Project Management, Fourth Edition, Bob Hughes

& Mike Cotterell, 2005, McGraw-Hill
29
Balancing Costs
Software Project Management, Fourth Edition, Bob Hughes

& Mike Cotterell, 2005, McGraw-Hill
30
Develop Budget
Cost estimating determines the total cost of the project
Budgeting identifies where and when costs will be expended

Source: ISO 21500
Needed to define invoices and payment conditions

31
Cash Flow
Daily Cost M1 M2 M3 M4 M5 M6 Total

PM 400 € 10 4 000 € 5 2 000 € 5 2 000 € 5 2 000 € 5 2 000 € 5 2 000 € 14 000 €
TL 1 300 € 5 1 500 € 20 6 000 € 20 6 000 € 20 6 000 € 20 6 000 € 20 6 000 € 31 500 €
TL 2 300 € 5 1 500 € 20 6 000 € 20 6 000 € 20 6 000 € 20 6 000 € 20 6 000 € 31 500 €
CJ 1 150 € 0€ 20 3 000 € 20 3 000 € 20 3 000 € 20 3 000 € 20 3 000 € 15 000 €
CJ 2 150 € 0€ 20 3 000 € 20 3 000 € 20 3 000 € 20 3 000 € 0 0€ 12 000 €
CJ 3 150 € 0€ 20 3 000 € 20 3 000 € 20 3 000 € 20 3 000 € 0 0€ 12 000 €
RH Costs 7 000 € 23 000 € 23 000 € 23 000 € 23 000 € 17 000 € 116 000 €
Travel expenses 0€
Products 20 000 € 20 000 €
Subcontracts
Kms 0,36 € 0€ 0,00 € 0€ 0€ 0€ 600 216 €
Ajuda Custo 62,75 € 0€ 0,00 € 0€ 0€ 0€ 0€ 0€
20 000 €
Costs 136 216 € 27 000 € 23 000 € 23 000 € 23 000 € 23 000 € 17 216 €
Profits total 140 000 €

Margin 2,70%
Invoices 20% 30% 50%
28 000 € 0€ 42 000 € 0€ 0€ 70 000 € 140 000 €
Cash Flow 1 000 € -22 000 € -3 000 € -26 000 € -49 000 € 3 784 € 140 000 €

32

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GPI - Gestão de Projectos Informáticos

Project Costs Plan

Maria do Rosário Bernardo

• Estimate activities duration

• General costs estimating

Maria do Rosário Bernardo

• To control and calculate variances (Cost

Maria do Rosário Bernardo

“The purpose of Estimate costs is to obtain an

“Cost estimates can be expressed in terms of units

Source: ISO 21500

When expressed in currency, and when

Projects dealing in more than one currency should

Source: ISO 21500

Cost Components (1)

Component Description Assigned Cost

Labour Estimated cost for the human = Junior days * rate1

Maria do Rosário Bernardo

Labour cost rates

Organization Costs rates by resource category (defined based

Cost Components (2)

Component Description Assigned Cost

Materials HW, SW package,… Purchase cost

Maria do Rosário Bernardo

Cost Components (3)

Component Description Assigned Cost

Subcontractors Outsourcing some of the work Outsourcing

Maria do Rosário Bernardo

Cost Components (4)

Component Description Assigned Cost

Management Project manager cost Effort days *

Maria do Rosário Bernardo

Cost Components (5)

Component Description Assigned Cost

taxes Eg. VAT (IVA) Only if the

Cost are reported at WP level ( relate

Maria do Rosário Bernardo

Cost Breakdown Structure - CBS

WP 1.1 – 3.500 WP 2.1 – 10.000

WP 1.2 - 6.500 WP 2.2 – 10.000

WP 1.n - 5.000 Sub-WP 2.2.1 – 7.000

Sub-WP 2.2.2 – 3.000

Maria do Rosário Bernardo

“The purpose of Develop budget is to distribute the

“The assignment of budgets to scheduled segments of

“The budgets are normally distributed in the same manner

ACT 1: 2 * 300 + 4 * 150 = 1.200

Maria do Rosário Bernardo

ID Task Name Duration

Maria do Rosário Bernardo

Verificar Distribuição dos Recursos

Maria do Rosário Bernardo

Optimizar Distribuição dos Recursos

Maria do Rosário Bernardo

• Project Management Software Tool allow

Maria do Rosário Bernardo

Maria do Rosário Bernardo

Optimized Resources Assigments

Team : less 2 members

Resources Optimization Steps

Maria do Rosário Bernardo

Maria do Rosário Bernardo

• Project management cost