overhead costs - opportunity costs

[Robert Wechsler]

How do you enter overhead as a cost per day for the duration of the project.
For example - I am developing a plan for the renovation of a rsidential
complex and the is a significant opportinity cost for delay as well as
getting units rented as soon as they are completed.
It is only possible to enter project costs as fixed one off overhead and not
as a cost per day for the duration of the project so that an optimisation
could be possiible.
Would appreciate advise
Robert

 

[davegb]

How do you enter overhead as a cost per day for the duration of the project.
For example - I am developing a plan for the renovation of a rsidential
complex and the is a significant opportinity cost for delay as well as
getting units rented as soon as they are completed.
It is only possible to enter project costs as fixed one off overhead and not
as a cost per day for the duration of the project so that an optimisation
could be possiible.
Would appreciate advise
Robert

While there are some workarounds to accomplish this in Project, I
wouldn't reccommend any of them, the downsides, which wouldn't be
apparent until you were well on your way with the schedule, would more
than offset any gain in doing this. Project is a scheduling tool, not
a financial analysis tool. It doesn't do financial analysis easily or
accurately. I'd do the financials in Excel, linking to and from
Project as needed. That can be done easily and accurately.

Hope this helps in your world.

 

[John]

How do you enter overhead as a cost per day for the duration of the project.
For example - I am developing a plan for the renovation of a rsidential
complex and the is a significant opportinity cost for delay as well as
getting units rented as soon as they are completed.
It is only possible to enter project costs as fixed one off overhead and not
as a cost per day for the duration of the project so that an optimisation
could be possiible.
Would appreciate advise
Robert

Robert,
Although I agree 100% with Dave about not using Project as a financial
application, if you have a single overhead cost that you want to apply
to the full duration of the project, there is a fairly simple way to do
it.

Normally I would not recommend assigning a resource to a summary line,
but this is one of those cases where it does make some sense. First, on
the Resource Sheet create a material resource with a material label of
"daz" (note: you cannot use "days" because days is a key word). In the
Std. Rate column enter your daily overhead value (e.g. $100). On the
Gantt Chart, assign this material resource to the top summary line. Make
the assignment level equal to the duration of the summary line. For
example, if the total project duration is 80 days, you would assign the
overhead resource as 80, meaning 80 "daz" at $100/day. You will need to
change this assignment level if the overall project shortens (fat
chance) or lengthens.

You will not be able to see the overhead cost separately, but it will be
included into the Cost field on the Gantt Chart.

There are other ways to do this, but from your description of what you
want, this is a simple and dirty way to get there.

Hope this helps.

John
Project MVP

 

[davegb]

Robert,
Although I agree 100% with Dave about not using Project as a financial
application, if you have a single overhead cost that you want to apply
to the full duration of the project, there is a fairly simple way to do
it.

Normally I would not recommend assigning a resource to a summary line,
but this is one of those cases where it does make some sense. First, on
the Resource Sheet create a material resource with a material label of
"daz" (note: you cannot use "days" because days is a key word). In the
Std. Rate column enter your daily overhead value (e.g. $100). On the
Gantt Chart, assign this material resource to the top summary line. Make
the assignment level equal to the duration of the summary line. For
example, if the total project duration is 80 days, you would assign the
overhead resource as 80, meaning 80 "daz" at $100/day. You will need to
change this assignment level if the overall project shortens (fat
chance) or lengthens.

You will not be able to see the overhead cost separately, but it will be
included into the Cost field on the Gantt Chart.

There are other ways to do this, but from your description of what you
want, this is a simple and dirty way to get there.

Hope this helps.

John
Project MVP

John,
I considered suggesting this, but, as you said, it's simple, but
"dirty". I'd have to check, but as I recall, once you assign a cost to
the Summary task, it no longer reflects progress on it's subtasks (I
know this is true if you assign a resource), which can be a major
problem in itself. Maybe in this case it'll work out.

 

[John]

John,
I considered suggesting this, but, as you said, it's simple, but
"dirty". I'd have to check, but as I recall, once you assign a cost to
the Summary task, it no longer reflects progress on it's subtasks (I
know this is true if you assign a resource), which can be a major
problem in itself. Maybe in this case it'll work out.

Dave,
I'm not sure what you mean about not showing summary progress. I tried
it on a sample file and the summary line still shows progress as per
normal. You must be thinking of something else.

John
Project MVP

 

[davegb]

Dave,
I'm not sure what you mean about not showing summary progress. I tried
it on a sample file and the summary line still shows progress as per
normal. You must be thinking of something else.

John
Project MVP- Hide quoted text -

- Show quoted text -

I remember that if you assign resources to a summary line, it's
percent complete is no longer a function of the progress on it's
subtasks, but I couldn't remember if it is the same for assigning a
cost to a summary line. Thanks for checking it, now I remember!

 

[John]

I remember that if you assign resources to a summary line, it's
percent complete is no longer a function of the progress on it's
subtasks, but I couldn't remember if it is the same for assigning a
cost to a summary line. Thanks for checking it, now I remember!

Dave,
That's just it, in my test example, I assigned a material resource to
the summary line, not a direct cost. Percent complete for the summary
was calculated normally. So I'm not quite sure what it is you remember.

John

 

[Robert Wechsler]

Thanks for all those who responded.

However, in order to optimise total cost of the project, the number of days
is a variable itself.

I was thinking defining a new cost variable as
day per cost x Datediff(start - enddate)

However I floundered with the format and syntax that is available in 2003
version.

Could anyone assist futher.

Regards

Robert

 

[davegb]

Dave,
That's just it, in my test example, I assigned a material resource to
the summary line, not a direct cost. Percent complete for the summary
was calculated normally. So I'm not quite sure what it is you remember.

John- Hide quoted text -

- Show quoted text -

Sorry, I'm not explaining myself well here. I meant a normal, not a
material, resource. When you assign a normal resource to a Summary
line, it's progress is no longer reflective of the progress of it's
subtasks, but of the Actual Work/Work for that resource on that task.

 

[John]

Sorry, I'm not explaining myself well here. I meant a normal, not a
material, resource. When you assign a normal resource to a Summary
line, it's progress is no longer reflective of the progress of it's
subtasks, but of the Actual Work/Work for that resource on that task.

Dave,
Let me help you out here. There are two, (and possibly more), ways to
express progress in Project. The most common way is via percent complete
which is duration based and is used to display the progress line on
Gantt bars. The second is to look at percent work complete. When you
first mentioned progress I immediately focused on the standard percent
complete method. Adding a resource, labor or non-labor to a summary line
has no impact on this measurement and that's where we weren't clicking
at all. You apparently were thinking in terms of percent work complete.
A material resource on a summary line will not affect this parameter
because there is no work associated with a material resource. On the
other hand, for a labor resource, assigning it to a summary line will of
course directly affect the percent work complete parameter because work
is involved.

I trust this now puts us on the same page and helps clarify things for
anyone else who has been following this thread.

John
Project MVP

 

[Jan De Messemaeker]

Hi all,

Just for the fun - my advice to students and users alike is not NEVER use
neither percent complete nor Work percent complete but only actual and
remaining - remember a job is half the way the first time it is announced
95% finished..

Greetings,

 

[davegb]

Dave,
Let me help you out here. There are two, (and possibly more), ways to
express progress in Project. The most common way is via percent complete
which is duration based and is used to display the progress line on
Gantt bars. The second is to look at percent work complete. When you
first mentioned progress I immediately focused on the standard percent
complete method. Adding a resource, labor or non-labor to a summary line
has no impact on this measurement and that's where we weren't clicking
at all. You apparently were thinking in terms of percent work complete.
A material resource on a summary line will not affect this parameter
because there is no work associated with a material resource. On the
other hand, for a labor resource, assigning it to a summary line will of
course directly affect the percent work complete parameter because work
is involved.

I trust this now puts us on the same page and helps clarify things for
anyone else who has been following this thread.

John
Project MVP

Good explanation, John. Sometimes I think I've been doing this too
long! (17 years now) Again, I made an assumption that I didn't clarify
(I guess it's no longer and assumption if I clarify it, is it?) I
NEVER use standard % Complete (duration % complete). Except on
entirely linear activities (like ditch-digging or a few other things),
it's meaningless. It is useful as a tool to calculate other indicators
in some instances, but not as a measure of real progress in most
instances. I always advise my clients/students to change over to %
Work Complete and work from there. I rarely care how many days have
passed since work started. I need to know how much work has been
accomplished against how much was supposed to be (EV). In fact, I
steer my clients away from using ANY % complete as an input to
progress. It's too easily influenced by pressure to reach a deadline.
I encourage them to use it as a reporting tool only.
Thanks for the clarification.

 

[John]

Good explanation, John. Sometimes I think I've been doing this too
long! (17 years now) Again, I made an assumption that I didn't clarify
(I guess it's no longer and assumption if I clarify it, is it?) I
NEVER use standard % Complete (duration % complete). Except on
entirely linear activities (like ditch-digging or a few other things),
it's meaningless. It is useful as a tool to calculate other indicators
in some instances, but not as a measure of real progress in most
instances. I always advise my clients/students to change over to %
Work Complete and work from there. I rarely care how many days have
passed since work started. I need to know how much work has been
accomplished against how much was supposed to be (EV). In fact, I
steer my clients away from using ANY % complete as an input to
progress. It's too easily influenced by pressure to reach a deadline.
I encourage them to use it as a reporting tool only.
Thanks for the clarification.

Dave,
I agree that the % Complete field doesn't really measure anything, it's
work that gets things done. However, I find that many if not most users
view progress as the progress line on the Gantt bar. It's just the way
it is.

Anyway, you're welcome.
John