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Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project:

Direct Costs

These costs are on account with a specific work package. Direct costs are attributed to efforts made by the project manager, project team, and folks executing the work package. These costs signify actual outflow and are compensated as the project evolves. Examples of direct costs are labor, equipment, materials, and other (Gray & Larson, 2005).

Direct Overhead Costs

Direct overhead rates represent which resources are being used in a project. Direct overhead costs relate to project deliverables. An example is the salary of the project manager or the rental of a project workspace. While overhead is not an immediate expense, it must be remunerated (Gray & Larson, 2005).

General and Administrative (G&A) Overhead Costs

These costs are not straightforwardly associated to a project. Examples include organization costs such as advertising or accounting. G&A costs are generally billed as a percent of total costs, or items such as labor, materials, or equipment. Using the sums of direct and overhead costs for work packages, it is possible to cumulate the costs for any deliverable for the entire project (Gray & Larson, 2005).

Figure 1. Primary Data Sets Used by the Team to Determine the Budget

Type Description Amount

Cost of the Software Depreciation can be taken. G&A Cost 450,000

Training Costs Training for 12 users. Training time is 2 days per person. 6720

In-House Training Support Administrative Costs for 2 vendors in house 2800

Total Training Costs 9,520

Equipment and Material Costs Purchase of three servers and backup software 3750

4500

8250

Labor Costs

Average salary = $91

Programmer 40 3640

Database Manager 65 5915

Project Analyst 150 13650

Operations Analyst 20 1820

Interface Manager 20 1820

Network Analyst 10 910

27,755

Total Cost 495,525

At the beginning of any project, a project manager along with the management team will create an estimate of time and costs, which will lead to the initial approved budget amount. As most project managers know, "Past experience is a good starting point for developing team and cost estimates." (Gray, et al 2005) A good rule of thumb with any estimates is that a manager should aim to have a 95% or more probability of meeting both time and cost estimates. Many factors present can influence the accuracy of the team's estimates.

The first factor that may present itself is the "planning horizon." This idea means "...estimates of current events are 100 percent accurate but are reduced more for distant events." (Gray, et al 2005) By planning a project closest to the launch date, the project manager can create estimates that are more accurate based on available resources and realistic time constraints. Another factor that contributes to the planning horizon is the project duration. Since this project involves setting up a new technology, this can affect the accuracy of initial estimates. The project duration may change dramatically if the new technology takes longer to install or train new users. "Sometimes poorly written scope specifications for new technology result in errors in estimating time and costs." (Gray, et al 2005)

One main factor that can seriously affect the accuracy of estimates is the people involved in the project. The people that can influence the estimates include the members creating the estimates and the members who are responsible for implementing the new project. When considering how people affect estimates, it can include anything from skills of people creating estimates; to people responsible for learning the new technology; the turnover rate; and even the amount of productive hours each team member can contribute on a daily basis. "It should also be noted that adding new people to a project increases time spent communicating." (Gray, et al 2005)

The organization culture can also have a large impact on the effectiveness of project estimates. In some cultures, it may be acceptable to pad estimates in order to avoid a situation where there is not enough time or money. In other business atmospheres, they may frown upon inaccurate estimates and may take adverse action if this done. An organization's culture can dictate how each project manager should make their estimates and therefore may contribute to a more accurate estimate for both time and costs.

As with any other topic in project management, there are also "non-project factors" that can contribute to the estimate's accuracy. Since this project is working with new technology, the project may experience some downtime due to machine malfunctions or server problems. A team must also factor in holiday schedules, available resources, and certain "acts of god" that may present themselves throughout the duration of the project.

There are several good reasons why estimates are important. It is needed to

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