Andy HesseyDirector| AHmedia (Project Management) LtdCrawley, United Kingdom
Hello all.
I have recently set up a new PMO for my company and we are still finding our feet within the business.
One of the debates at the moment is how, as a business, we charge for my time. I have been brought in as a revenue generating resource.
At the moment we are working out roughly how many hours I need to complete the project (based upon size and length of project) and charging the client x hours at £y . Generally we’re not too far off if the project runs smoothly – but if we go over because of project issues, I start to eat into my margin.
What is the best way of charging clients for Project Management time while still generating as much revenue as possible and without giving the clients a nasty shock? Are we about right with how we are going about this?
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Russell GeakeProject Management Consultant| Deciduous Partners LtdLostwithiel, Cornwall, United Kingdom
First, if you are strictly looking at charging for time, the maths is fairly simple, you know how much you cost the business to be there...your salary, employers national insurance, any benefits (car [which then must include insurance, tax, fuel maintenance], tube ticket, season ticket to local football club), your desk space, IT equipment, etc...and if you don't know this already, you need to find out (or at least make a pretty good guess). The problem with time-based charging is that if you are due to a client meeting in Manchester and the trains are delayed, who pays for the time you spend waiting - especially if you are simultaneously working for another client on your smartphone!
Alternatively, and my preferred option, is to charge for the VALUE that you add to the project. Operating a good PMO should see significant benefits to the management of projects. So you can, from experience, build a cost shedule - e.g. Meeting facilitation £250, Outline project plan £1800, Risk assessment workshop £795... Amendments and adminstration fees £250...that way the client knows what they are getting for their money, make project management outputs your products and people will understand why they are buying them. It also makes an incentive to get things right and agreed. If there are any over-runs you can either charge for them separately or not depending on the value you place on the client and whether you can justify the additional charge as being a result of client or internal delays or scope changes.
Hope this helps.
Russell
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Linda HillProgram Manager| MicrosoftRenton, Wa, United States
Nice response Russell. I like the details as well as the practical examples. Saving Changes...
Wayne MackRetired| RetiredSouth Riding, Va, United States
The short answer is to account for the project manager's time in the same way time is accounted for by the rest of the project team. If the project team bills per hour, the project manager should as well; if the project is fixed price, the company eats project team costs in excess of the agreement.
If the project manager is spending extra time on a project, he needs to provide justification as to what is being accomplished. When a project is in trouble, most of the effort in resolving the issue will come from the project team. The project manager will spend a little extra time to provide additional stakeholder status, replan, and general cheerleading and encouragement, but this will not usually be a significant increase in daily or weekly time expended. Lastly, the project manager needs to ensure that other projects are not being short-changed while he is concentrating on a problem project.
Don't over think the billing aspect for the project manager, just use what is already in place for the project team.
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David MorganProject Manager| Experian PLCGrantham, United Kingdom
If its fixed-price, then surely some contingency will be built in for a degree of over-run (even if not stipulated, the contingency could be within the blended rates used for the calculation). Saving Changes...
