Introduction

In most instances, the success of a project is measured by its profitability. The probability of a project doing well financially is increased when viable resource management and performance measurement techniques are employed. The concepts include the following:

• Budgeting and cost collection

• Time-cost trade-offs: Impacts on the schedule and total project cost

• Project constraints

• Resource limitations

• Project resource allocation

• Performance measurement and integrated cost/schedule systems

• Scope and change control

• Value engineering

• Estimating cash flows

Budgeting and Cost Collection

A project budget is a plan of estimated expenditures during the project period. This plan is phased in periodic increments (e.g., days, weeks, months, and quarters). The totals of the increments are stated in dollars, representing the total budget for completing the project. Ideally, the established budget is a lower dollar amount than the offsetting benefits received, and the project manager is usually motivated to complete the project under budget.

The cost collection system is the mechanism used to track all costs expended on the project. Such costs include:

• Labor dollars (straight time and overtime)

• Indirect labor dollars (e.g., fringe benefits, the cost of indirect management)

• Materials

• Vendor and subcontractor costs

The tool to record the costs is often a time-recording device such as a time card or on-line device. A comprehensive discussion of project costs appears in Chapter 11.

The budgeting and cost collection processes generally begin after the project has been fairly thoroughly planned. However, from time...