Building from the project you created in Unit 1,
Identify all of the costs involved in the project. Label the costs either direct costs, project overhead costs, or general and administrative overhead costs.
Develop a time-phased budget for the project. What will be the cumulative cost of the project?
Identify areas in the budget where cost cutting can be made if needed?
Identify and assess one major and one minor risk inherent to the project. Develop a contingency plan for each of these risks.
To identify and analyze the costs involved in a project, follow these steps:
1. Direct Costs: These are costs that can be attributed directly to a specific activity or component of the project. Examples include materials, labor, and subcontractors.
- Review the project plan and identify all the activities that require resources or expenses.
- For each activity, determine the costs associated with it. These may include the cost of materials, hourly rates for labor, or fees for subcontractors.
- Categorize these costs as direct costs.
2. Project Overhead Costs: These costs are associated with the project as a whole and cannot be attributed directly to a specific activity. Examples include project management fees, equipment rental, and project-specific travel expenses.
- Review the project plan and identify any costs that are necessary for the overall execution of the project.
- Categorize these costs as project overhead costs.
3. General and Administrative Overhead Costs: These are costs that are not specific to the project but are necessary for the ongoing operations of the organization. Examples include utilities, office rent, and salaries of administrative staff.
- Review the organization's general and administrative expenses.
- Identify any costs that are applicable to the project.
- Categorize these costs as general and administrative overhead costs.
Once you have identified and categorized the costs, you can develop a time-phased budget for the project. This involves allocating the costs to specific time periods based on the project schedule.
1. Use the project schedule to determine the duration of each activity.
2. Multiply the duration by the associated costs to determine the cost for each time period.
3. Add up the costs for each time period to get the cumulative cost of the project.
To identify areas where cost cutting can be made if needed, examine the budget and project plan:
1. Review the costs for each activity and identify any that may be reduced without significantly impacting the project.
2. Look for alternative suppliers or options that may provide cost savings.
3. Assess the feasibility of extending deadlines or reducing scope, if possible, to lower overall costs.
For identifying and assessing risks in the project:
1. Identify and analyze major risks: These are risks that can have a significant impact on the project's success. Examples include resource shortages, market changes, or regulatory compliance issues.
2. Develop contingency plans: These are measures that can be taken to mitigate or manage the identified risks. For each major risk, create a plan outlining steps to address or mitigate the risk, such as identifying alternative suppliers, establishing backups for critical resources, or implementing risk management processes.
3. Identify and assess minor risks: These are risks that may have a smaller impact on the project. Examples include minor delays, communication issues, or limited availability of non-critical resources.
4. Develop contingency plans: Similar to major risks, create contingency plans for minor risks but with potentially less extensive measures based on their impact and scale.
By following these steps, you can systematically identify project costs, develop a time-phased budget, assess potential cost-cutting areas, and address major and minor risks through appropriate contingency planning.