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Chapter 13 - Reducing Costs Introduction The Kinds of Costs You Can Display View the Total Project Cost View the Total Cost of a Task View the Total Cost of a Resource View How Costs Are Distributed over a Task's Duration Strategies for Reducing Project Cost Cut the Project Scope Replace Expensive Resources with Less Costly Ones Microsoft Project 98 – Chapter 13 Page of Introduction For some projects, cost isn’t an issue You try to achieve your project goals while someone else worries about the budget But if you’re working with a limited budget or need to monitor costs throughout the project, you probably want to reduce costs to a minimum Before you can reduce costs, you need to know which factors contribute to the overall cost of your project Typically, resources — people and equipment — take the largest bite out of a project budget Keeping resource costs under control should be your highest priority if your budget is very tight In addition to resources, materials and facilities can also add to project costs significantly Usually, the larger your project, the more it costs You need more resources, materials, and possibly more facilities To reduce costs across the board, you might consider cutting the project scope If you can’t cut the project scope or if costs aren’t reduced enough when you cut the scope, look for specific costs that you may be able to reduce or eliminate First check to see where your costs are coming from by examining total project cost, task costs, cumulative costs, and resource costs As you pinpoint unnecessary costs, you can use one of several specific strategies to reduce or eliminate them The Kinds of Costs You Can Display Before devising a strategy for cutting costs, find out which factors cost the most and which of those costs can be reduced The way to determine the various costs involved is to display the cost of each contributing factor You can display: • The total project cost • The total cost of an individual task • The total cost of a resource • The total cost of an assignment • Costs distributed over a task’s duration The total cost is the calculated cost of the project, task, resource, or assignment over the life of the project Microsoft Project calculates the costs it displays based on the fixed costs and the rate costs you enter A fixed cost is a specific cost that does not rely on how much time or work is done to complete a task Rate costs result from hourly, weekly, monthly, or annual rates paid to resources A cost distributed over a task’s duration can be a baseline cost, cumulative cost, or actual cost that’s apportioned over time For example, the total cost of a 3-day task is $45 Broken down by day, the distributed cost might be $20 on the first day, $10 on the second day, and $15 on the third day View the Total Project Cost If you suspect your project might go over budget, the first piece of information to check is the total project cost This shows you what the entire project will cost based on cost information you’ve entered into Microsoft Project Microsoft Project 98 – Chapter 13 Page of Should you decide that the total project cost is too high, you can go on to view individual task and resource costs, watching for the ones you can reduce to bring the total project cost in line with your budget To view the total project cost On the Project menu, click Project Information Click Statistics In the bottom table, the total project cost is shown in the Current row of the Cost field View the Total Cost of a Task After you check the total cost of your project and find that it does in fact exceed your budget, you can check the cost of individual tasks to see which ones can most readily be reduced For example, you might want to reduce the cost of the most expensive or least important tasks first The total cost of a task is the sum of the resource costs plus any fixed costs that are associated with the task After examining a task’s cost, you might decide that you can best reduce it by reducing either the resource cost or the fixed cost To view the total cost of a task On the View Bar, click Gantt Chart On the View menu, point to Table, and then click Cost Scroll or drag the divider bar to the right to view the Total Cost field View the Total Cost of a Resource Because resources are often a project’s biggest expense, an effective way to reduce project cost is to reduce resource costs To determine which resource costs to reduce, first display the total cost of each resource To view the total cost of a resource On the View Bar, click Resource Sheet On the View menu, point to Table, and then click Cost Examine the Cost field to determine the total cost of the resource View How Costs Are Distributed over a Task’s Duration You can view how total costs as well as baseline, actual, and cumulative costs are distributed over a task’s duration To view how total costs are distributed over a task’s duration On the View Bar, click Task Usage On the Format menu, point to Details, and then click Cost Examine the Cost field to determine the total cost of the resource To view how baseline costs, actual costs, and cumulative costs are distributed over a task’s duration On the View Bar, click Task Usage On the Format menu, click Detail Styles Click the Usage Details tab In the Available fields list, click the cost fields you want to show, and then click Show Strategies for Reducing Project Cost After you’ve determined that your project might not finish within budget and you’ve examined the project costs, you should have a good sense of which costs you can eliminate or reduce You can use several approaches to reduce project costs: Microsoft Project 98 – Chapter 13 Page of • • • Cut the project scope Replace expensive resources with less costly ones Reschedule work You can use a combination of these approaches to reduce costs For example, to meet your budget you may want to reduce the number of resources assigned to a task, cut the amount of work on another task, and delete some tasks If the cost of the project takes precedence over other goals, you may also choose to reduce the scope of the project by reducing the work done on various tasks or even deleting tasks Cut the Project Scope When your budget is fixed, and you’re unable to increase it, cost becomes your most important constraining factor Your only option for staying within budget might be to reduce scope Cutting the scope usually reduces costs You trim the scope by deleting tasks or by reducing the scope of individual tasks Either way, you’ll decrease the total number of work hours in the project Thus, you can pay fewer resources to the work that remains or pay the same number of resources to work fewer hours, lowering both resource costs and overall costs Replace Expensive Resources with Less Costly Ones Though using inexpensive resources sounds like an obvious cost-cutting strategy, exchanging less costly resources for expensive ones can be tricky Replace an expensive resource with an inexpensive one on a given task when: • An inexpensive resource is available who is qualified to perform the task • You want to assign the more expensive resource to fewer tasks • The inexpensive resource can perform the task without significantly diminishing quality • The inexpensive resource will not significantly increase the task duration Following these general guidelines will help you avoid paying the same amount you would have paid the more expensive resource, but perhaps ending up with a lower-quality result or a later project finish date To replace an expensive resource with a less costly one To compare resource costs, display the Resource Sheet view On the View Bar, click Gantt Chart In the Task Name field, select the task for which you want to replace a resource Click Assign Resources In the Name field, select the resource you want to replace on the task Click Replace In the Name field, select the resource you now want to assign to the task, and then click OK Microsoft Project 98 – Chapter 13 Page of