6.8. Key Terms
Key Terms
- Analogous Estimating: Uses information from a previous project to estimate the cost of completing a similar project in the future. This provides a quick estimate but should be used with caution. Analogous estimating only works when comparing projects that are similar in scope and will be completed in similar conditions.
- Contingency Fund: This is a number of resources set aside to cover unanticipated costs.
- Contingency Plan: Which is a plan for addressing key possible obstacles to project success. As discussed in Ch. 6: Risk Management, a contingency plan defines alternate paths for the project in case various risks are realized.
- Cost of Quality: You will need to figure the cost of all your quality-related activities into the overall budget. Since it’s cheaper to find bugs earlier in the project than later, there are always quality costs associated with everything your project produces. Cost of quality is just a way of tracking the cost of those activities. It is the amount of money it takes to do the project right.
- Determination of Resource Cost Rates: People who will be working on the project all work at a specific rate. Any materials you use to build the project (e.g., wood or wiring) will be charged at a rate too. Determining resource costs means figuring out what the rate for labour and materials will be.
- Direct Cost: “An expense that can be traced directly to (or identified with) a specific cost center or cost objects such as a department, process, or product” (Business Dictionary, n.d.).
- Direct Project Overhead Costs: Costs that are directly tied to specific resources in the organization that is being used in the project. Examples include the cost of lighting, heating, and cleaning the space where the project team works.
- General and Administrative (G&A) Overhead Costs: The “indirect costs of running a business,” such as IT support, accounting, and marketing” (Tracy, n.d., para. 1).
- Reserve Analysis: You need to set aside some money for cost overruns. If you know that your project has a risk of something expensive happening, it is better to have some cash available to deal with it. Reserve analysis means putting some cash away in case of overruns.
- Resource Leveling: aims at smoothing the stock of resources on hand, reducing both excess inventories and shortages.
- Resource Management: The efficient and effective deployment of an organization’s resources when they are needed. Such resources may include financial resources, inventory, human skills, production resources, or information technology.
- Vendor Bid Analysis: Sometimes you will need to work with an external contractor to get your project done. You might even have more than one contractor bid on the job. This tool is about evaluating those bids and choosing the one you will accept.
