Hello again and welcome back to our course on Project 2013 Advanced.
In this section I’m going to start to look at costs in detail.
I’m going to assume as usual that you’ve got a good basic knowledge of costs and I’m
going to concentrate on some of the more advanced aspects of costs.
Now in this section and the next one, I’m really going to concentrate on setting costs
up and understanding what the options are.
Reporting and in particular the new style of reporting in Project 2013 will have to
wait for a later section of the course.
Now in explaining some of the more advanced aspects of costs, I could probably occupy
the whole of the rest of this course because there’s actually quite a bit to it.
So I’m going to concentrate on the costs associated with the work resources.
So primarily in the example we’re going to use this is going to be the cost associated
with people.
Having said that, almost all of the aspects we need to cover will be covered as part of
that.
And then right at the end of this part of the course, I’ll look at some specific things
relating to materials.
So I’m going to go back to our website development project which is primarily about people.
There’s very little in the way of materials associated with this sort of thing.
And then when we need to look at materials, we’ll look back at our building project
again.
Now for the purposes of this and the next section, I’ve rescheduled the whole of the
web development project to have started in February of 2013.
So we’re a little bit along the way now but so far, I haven’t actually assigned
any resources to this project at all and we’ve actually got no cost setup at all at the moment.
So we’re pretty much starting from scratch from the point of view of costs.
Now let me look at a couple of basic aspects of cost that we’re going to need available
to us in this section.
First of all, I’m looking at the Gantt Chart for this project now.
I’m going to change the table.
Currently, I have the default entry table selected.
I’m going to choose the cost table and let’s just talk very briefly about the cost table.
Now the cost table contains basic information.
As with any other table, I can customize it.
I can insert and hide columns at will.
But basically it has for each task a fixed cost column.
It has a fixed cost accrual column.
It has a total cost column.
And then we have baseline, variance, actual, and remaining.
Now of course the last ones here, baseline, variance, actual, and remaining will only
start to occupied when we actually put some costs in.
And then as we track progress as the project progresses, we’ll see what the actual costs
have been so far.
We’ll be able to look at the variance against the baseline at whatever point we decide to
save the baseline and we’ll be able to look at what the remaining costs are.
But the first thing I want to look at are the first two columns here: fixed cost and
fixed cost accrual.
Now in general the costs associated with a project can come from all sorts of directions
and take many forms and it’s usually very important to make sure that you keep good
track of all of the costs.
Most of the costs for most projects are a result of using up resources, either material
resources that basically do get consumed or work resources, people that are working on
the project, maybe external contractors and so on.
But you also have to have quite a lot of flexibility when dealing with costs and I want to look
at this first example of a fixed task cost.
Fixed task costs can happen in a number of ways and I want to look at one or two of those
now.
One way in which a fixed task cost can be incurred, let’s take an example, that ID
2 tendering process contract.
I might get somebody else basically to do the whole of that task.
I’m not really worried about what resources they use as long as they don’t use resources
that I need.
If they say to me I will get the tendering process underway.
I’ll receive the tenders.
I’ll give you a short list.
I’ll interview the potential suppliers, etc.
The total cost of X, that’s a single task.
I don’t need to worry about the detail.
I could just put in a fixed task cost for that task into my project schedule and therefore
the cost will be involved within my project without me being involved in the detail at
all.
And that’s a perfectly viable and feasible way of going about a task like that from a
cost point of view.
But usually things are a bit more complicated.
And with a task like that, we may more be in the situation of saying I’ve actually
got to get some of my team involved in that tendering process and awarding that contract.
I can’t really just farm the whole job off to somebody else.
But there will be a fixed aspect of the cost.
So I’m going to assign some resources but I’m going to need to get some tender documentation
prepared, for example.
I need to get somebody to prepare the tender documentation based on information I give
them, probably prepare it in a company standard format, make up packs, and then basically
contact potential suppliers and say “Would you like a tender pack?” and when they’ve
got their tender pack deal with the response and so on.
And at least line the tenders up in front of me so that I can start to look at them
and decide who to short list.
Now if a task like that has a fixed cost element, then all I need to do is to put that fixed
cost element in here.
So let’s suppose that I’ve spoken to one of my colleagues and said, “How much will
it cost to get this tendering process to the stage that all of the documents are prepared
on the basis of information that I’ve given you?”
And then basically you’ve issued the tender documents to the people that are interested.
You’ve received the documents.
You’ve maybe filed them all away somewhere, possibly electronically, and you’re going
to present them to me so that I can start to look at them and try to start to produce
a short list of potential suppliers.
So let’s suppose that I’ve told that the cost of doing that is going to be $2,000.
All I need to do is to type 2,000 in there as my fixed cost, and that’s the first cost
on this particular project.
Now I cannot overemphasize the fact that there are always different ways of doing these things.
That’s one way of dealing with this particular situation.
I tend to try to keep things pretty simple myself.
So if I’ve got a fixed price for getting a job done, I tend to put it in as a fixed
task cost in just the way that I’ve done it there.
I could, of course, have made the tendering team a resource and I could have assigned
a fixed cost to that resource and assigned that resource to this task instead.
I think that would have been overcomplicating this one, but depending on the specific situation
you’re in, you have a number of ways of approaching this kind of cost issue in Project
2013 and you really need to decide on the best one to suit the circumstances that you’re
in.
Now let’s look at the accrual method for this particular fixed task cost.
Now accrual is something that many project managers using Microsoft Project would never
really come across because very often they’re dealing with internal projects where money
doesn’t necessarily change hands.
But if you’re dealing with projects where money does change hands or at least where
cash flow is important, getting the accrual method right for each of your tasks is very
important.
Now if we take the particular fixed cost I’ve just assigned, am I going to pay that up front?
Am I going to pay it at the end?
Or am I going to pay it throughout the life of that particular task?
A period of about three months, by the way.
Now you might think it doesn’t really matter.
I generally think that it does.
Partly because if you for example left it at the default there of prorated but in fact
you had to pay the money up front, so I had to hand over the $2,000, even if it was to
a department in my own company, I would seem to have spend $2,000 at the beginning of February
and then be constantly overspent for the next three months because I would only be accruing
that cost over the life of that task and I would appear to have spent $2,000 up front
and then be constantly behind as far as cost is concerned.
Now if I’ve been told that I need to hand over that $2,000 up front, then as far as
accrual goes I ought to change that there to say Accrue at the start.
And then even if actual money doesn’t change hands, I know that as far as the budget and
cost control on my project’s concerned, I have correctly said that that $2,000 is
actually accrued at the start of the task.
And if money does change hands, it’ll just be a budgeted planned scheduled expenditure
of $2,000.
So that’s a little reminder about accruals.
I’m going to assume that you understand the principles of accruals.
Just let’s go to Project Options though, one little thing there that you may have either
forgotten about or maybe never even seen.
If you go to the Schedule Page there, one of the options if we move down the page there
is right at the bottom: Default fixed cost accrual.
That defaults to prorated when you install Project 2013.
If you tend to always have fixed cost accruals at the start or at the end, you can change
that default there.
There’s just one other thing to quickly cover here and this is more of a little tip
really.
And that is if you do something like this where you put in a fixed task cost like this
$2,000 I find particularly with very complex projects or ones which have a number of people
interested in the schedule of, it’s a good idea to put a note in to where this figure
came from, what this $2,000 represents.
So what I would normally do in this situation is maybe just open up the task information,
go to the Notes field, and put in a suitable note here.
So what I’ve put there is, “$2,000 fixed cost has been provided by Trevor in the Contracts
Department and covers preparation of ITTs distribution and initial processing of responses,
as well as associated discussions and costs.”
Now not only could that inform somebody else working on the project of where that figure
came from but in a few months time when I’ve forgotten, it’ll remind me as well.
So click on OK and that’s a useful reminder note.
Okay, that’s how you setup a fixed task cost and a quick resume of accruals.
In the next section we’re going to look at budget costs and then we’re going to
move on to actually assigning resources to the tasks in this project and trying to get
a proper budget for the whole project.
So please join me for that.