Re: What are my options for applying a cost contingency/reserve?
- From: Dave <nobody@xxxxxxxxxxxxx>
- Date: Thu, 20 Nov 2008 07:34:23 +0000
If your projects come in on time then surely it follows that the project estimates (in terms of work required) are good. If that is so, then why do your projects come in over-cost? Is that a quoted cost prior to the production of the plan or is it derived some other way/
Why would your customers be unhappy to see contingency on the plan? It is a standard part of project management. You could even structure the charges to the customer in a way that they get back the unused part of the contingency if the contract is suitably constructed.
NathanG wrote:
I'm definitely not in agreement with the "you'll run yourself out of business" comment. How are your margins calculated? What components make up those margins?.
Anyone else have a solution?
"Trevor Rabey" wrote:
What you are doing is called "padding" and it is a good way to run yourself out of business.
Trevor Rabey 0407213955 61 8 92727485 PERFECT PROJECT PLANNING www.perfectproject.com.au
"NathanG" <NathanG@xxxxxxxxxxxxxxxxxxxxxxxxx> wrote in message news:7C239FF5-5823-43CD-A934-A97F836708A3@xxxxxxxxxxxxxxxxWe're finding that our organization's COST estimates are typically
underestimated. We deliver our projects on-time, but rarely on budget.
We've decided to add a 10% contingency reserve to all of our fixed bid
projects. The challenges are...
1) our paying clients receive a copy of our project plan file in addition to
the Statement of Work
2) the client would be upset if they saw a line item in the project plan for
"contingency", so I need to add 10% to each task
3) the client knows the rates of our resources and can do the math, so the
cost ultimately has to be adjusted via the effort/work
4) the duration of the tasks/deliverables/project should not be impacted by
the 10%
5) I'd prefer not over-allocate resources (i.e. make all tasks fixed
duration and show each resource as doing 8.8 hours of work in an 8 hour day),
as I like to utilize the resource leveling feature
6) this "reserve" will not be refunded to the client if it's not used, at
this time, as a number of our projects have gone over-budget recently
Sorry to be so restrictive, but I wanted to provide a complete set of
"requirements". :-) Can anyone help me increase the project's cost by 10%?
What are my other options?
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