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Cost Concerns
Andy Jordan is President of Roffensian Consulting S.A., a Roatan, Honduras-based management consulting firm with a comprehensive project management practice. Andy always appreciates feedback and discussion on the issues raised in his articles and can be reached at [email protected]. Andy's new book Risk Management for Project Driven Organizations is now available.
Gantthead is looking at money this month--it’s very tempting to give you a detailed introspective on EVA, but I get a sneaking suspicion that you wouldn’t read it. I mean we are all project managers, not accountants, and that financial stuff is, well, dull. So let’s pretend that this article is about money…but actually explore something much more important--cost.
Do you know how much your projects cost? I mean do you really know--the true cost to the company of completing a project? If you don’t, then how can you decide which projects make sense to complete? When can you decide that it’s time to kill a project, and how can you distribute resources across projects correctly? Project cost is one of those issues that seems very straightforward on the face of it, but is actually a very complex issue to come to terms with.
Identifying your costs
Before you can measure your costs you need to identify all of the cost categories that you are dealing with, and even that isn’t very easy to do. There are some obvious things--software, hardware, outsourcing/consultants fees, etc.--that all involve money actually leaving the company, so let’s call them green dollar costs. Then there are all those “virtual money” costs--our internal resources and their salaries, time from other departments, etc. They are …
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