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Topics: Cost Management, Estimating
What to include in a project budget

I have a project with a schedule which is starting to slide. As a result, operational costs that were otherwise expected to stop will continue for an additional 6 months.
Given that these costs are directly attributable to the schedule slippage, should these costs be included in my project budget, or should they remain in operations?
Any help would be greatly appreciated.
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Generally, it would not be. Of course, the impact to operations should be clearly understood and shared.

Adam -

I'd view this as an erosion of your project benefits more than an increase to your project costs. In other words, cash in flows resulting from a reduction in operational costs are delayed so the ROI for your project is delayed rather than your costs growing.


I agree with Kiron and Stephane.

I would add that next time you start a project, you include this risk in your risk analysis, and determine up front how the additional operational costs will be handled. It should be part of your risk response plan. That way, however your organization wants to handle it, at least there's agreement up front about it.

Thanks a lot for your feedback, everyone. And I think we're in agreement.
Since the operational costs aren't a direct cost of completing the project we'll leave them in operations, but plan to show the overall (company wide) budget impact which will include these operational impacts.
Thanks again!

Direct impact on project costs to accommodate the overrun. Indirect impact on realizing the investment return, i.e., increasing the cost of delay.

To me, the answer depends on the assumptions in your your basis of estimate. You can develop estimates in many different ways. The estimate can include only non-recurring development, the complete product lifecycle, or anything in between.

From a professionalism and ethics standpoint, I see it as my responsibility as the PM to point out the impacts of schedule issues. It is real money and someone needs to account for it. How the accountants "bucket the money" (assign it to individual budgets based on the type of cost) is not my call. That is the role of the "bean counters" in Finance.

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