Any project, big or small, or regardless of the industry, needs to be performed and delivered under certain constraints. Cost is one of those constraints that project management needs to effectively control. Cost can be the driving force or an impeding factor in determining the future of a project. Therefore, one can easily spot the need for applying thorough cost estimating processes and techniques to ensure that a project can be viable.
Estimating a project’s costs is important for several reasons:
It enables project managers and stakeholders to weigh anticipated benefits against anticipated costs to see whether the project makes sense.
It allows project managers and stakeholders to see whether the necessary funds are available to support the project.
It serves as a guideline to help ensure that the project has enough funds to be completed.
Project’s cost includes both direct and indirect costs.
Direct costs on a project include the following:
Salaries for team members
Specific materials, supplies, and equipment
Travel to perform work
Subcontracts that provide support exclusively to your project
Indirect costs fall into the following two categories:
Overhead costs: Costs for products and services for your project that are difficult to subdivide and allocate directly. Examples include employee benefits, office space rent, general supplies, and the costs of furniture, fixtures, and equipment.
General and administrative costs: Expenditures that keep your organization operational.
In Sciforma, cost estimates can be made by using one of the following features:
Macro Planning – Costs are estimated through the first draft of the schedule by computing assignments and transaction costs before launching the project.
Forecast – Labor, Cost Item, and Transaction costs are estimated directly in the Finance workspace. This option relies on the Cost Centers.
The best cost-estimating method for your project depends on the scope of your project, the level of accuracy needed, and the practices of your organization.
For further information about Macro Planning, please refer to the Project Costs topic.
The Forecast feature allows the user to create cost estimates without assigning any resources, cost items, or creating any transactions. Forecast can then be compared with the Budget or the current costs.
Cost Centers (a.k.a. Budget) must have been created in order to use the Forecast feature.
In Sciforma, the user will be able to use the following forecast categories to estimate the costs: Labor Forecast, Cost Items Forecast, and Transactions Forecast. The sum of the values result in the Forecast Cost, which can then be compared to the project’s Budget or Total Cost.
Like the Budget, the Forecast can also be expressed in “Effort values” if the Budget Type is set to “Effort”.
For each category, the user will have the opportunity to break down the Forecast according to the selected Pivot value. This value will differ depending on the forecast category:
Labor Forecast – Job Classification, Organization, and Cost Center
Cost Items Forecast – Cost Center, Organization, and Category.
Transactions Forecast – Cost Center and Type.
To facilitate the creation of the Forecasts, the Administrator has the opportunity to create Forecast Templates for each category in the System Data workspace, Forecast Templates tab. Project Managers will then be able to import those templates in the Finance workspace.