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Creating an accurate project budget can be one of the most important aspect of placing a bid for a project or finalising the planning of a project. The need for detail and accuracy depends, naturally, on what you are doing but cost or money is always something that grabs attention. However, many project budgets fall short of expectations due to a failure to identify all the potential costs within a project budget. This is not something that is new, projects are very often about delivery and costs / budgets can become secondary in conversations

On the surface, the budgets seems like it only revolves around the labour and material costs. In reality, the project budget extends from labour costs to the cost of purchasing licences. Here are seven steps to creating a successful, accurate, and thorough project budget based on resources. The key to this is have some way of connecting what needs to be done to what it will cost. In our models, we use the word responsibilities for this.

So let’s look at the seven steps:

  • Step 1: – Identify the Work Packages Required to Deliver.
    • Use some model to identify the Work Package Level
      • Can it be delivered on?
      • Can it be resourced / ownership taken?
      • Can it be control / estimated?
  • Step 2: – Identify the Functional Resource required to deliver on the work packages … name what is required.
    • Operations
    • Support
    • Etc.
  • Step 3: – Look for a way to connect the work package with the Functional Resources. Recommendation for Resource Based Budgets is RACI
    • R (Responsible) – Who is needed to Do it
    • A (Accountable) – Who needs to take ownership to manage it
    • C (Consult) – A non-assigned Subject Expert that may be needed
    • I (Inform) – Who is needs to be updated / informed during the cycle
  • Step 4: – Allocated Responsibilities to resources and focus on what is required to deliver on work-package
  • Step 5: – Create a Model where we can convert responsibilities into effort
    • Responsibility is the Doer, so that can equate to 60% of the resources time
    • Accountability is the Owner and can equate to 20% of the resources time
  • Step 6: – Work with the functional leads to understand resources and effort and calibrate as necessary
  • Step 7: – Understand the cost classifications
    • Direct Costs such as :
      • Labor (people) rates for Internal FTE’s
      • Consultant fees or External FTE rate
      • Raw materials if used
      • Software licenses if required
      • Travel and assistance if needed
    • Indirect Costs such as
      • Office space (rent)
      • Office equipment
      • Any Levy’s imposed

Always remember that the project budget is an estimate and needs to be constantly reviewed and refined as the project processes go on. Once a draft budget is completed, discuss it with the team and determine their comments and suggestions as to the work description, schedule and budgets to create a more complete and accurate estimate. Depending on the team’s common understanding of the work tasks, schedule, costs, and the reasons to justify some changes, refine the work packages when there are significant differences or reiterate the estimates if there aren’t.

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