Posted by: ahmedashfaque | September 12, 2014

Why cost calculation is so difficult on projects?

If you have made project schedule and effort estimate correctly, even then estimated cost calculations can go haywire. Notwithstanding other factors do not change, costing can still create problems for you.

Let me explain. There are many factors which affect costs on a project. You may need to give raise to your project team due to increase in pay scales of engineers across the IT sector. So even though effort put in by your project team, the cost goes higher than you expected.

When you had selected your team then you may not have imagined that salary of some of your team members was much higher than the average salary scale. In this case again your cost will be on higher side than expected. Then a team member has decided to pursue better opportunity with another company midway through the project. You have no option but to make a replacement. This replacement turns out to be costly. Then again your costing goes on a higher side.

Sometimes, any of your team member is not performing. You need to make a replacement in this case again. The new guy coming may have a higher price tag. Again your costing will go on a higher side. At the same time, you incurred losses in terms of paying salary to the non performing guy for the time he spent on the project even though he had not contributed much.

In my view, productivity and cost estimates for any project can never be done accurately. The only solution can be when pay of project team members is directly linked to the amount of work they have completed. But here, amount of work is still debatable due to creativity component attached to it. The best, a project manager can do is to break the project work into small pieces and find out which pieces have least amount of creativity required and which pieces have high requirement of creativity. Based on this, he can determine productivity and hourly pay. But still, the same person’s hourly rate does not change for different pieces of work as of current practice. This needs to be changed.

But all this will surely create a lot of headache for the project manager.


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