Project Planning, Part 5 – Cost and Life Cycle Resource Planning
Prepare a cost estimate using your previously developed work breakdown structure (WBS). You’ll need to consider in-house and outsourced labor, as well as equipment, materials, travel costs, etc. Use a cost estimating structure that can later be loaded onto your accounting system for tracking purposes. Detailed costing is valuable even for projects that only use in-house labor (in which case you might only plan for and track hours, not dollars).
Example Cost Estimate
The following cost estimate is for a project to demolish structures and re-mediate a contaminated property. The technical aspects of the project are unimportant. The format of the cost estimate has universal application. Note that assumptions and exclusions are clearly stated.
Project Life Cycle Projections
The customer might want to know exactly when dollars are predicted to be spent in order to plan for the timing of expenditures. The provider might want to know the same thing to plan for cash flow (payroll preceding revenue by 60 days or more). Predicting specific labor needs enhances organizational manpower planning efforts. Your cost estimate should allow you to create life cycle resource planning predictions without much trouble. Below is how a typical rate of resource consumption might be graphed.
Next Article in This Series: A project planning quiz.