2 management - School of International Business and ...

219 Project Management
The costs of a project are to be estimated and planned at the beginning of a project. For the most
part, a first cost estimate is done during the initial economic analysis.
More precise budgeting is possible in advanced planning due to detailed knowledge gained about
the project.
Bottom-up and top-down approaches can be chosen for budgeting. Fig. 27 shows a comparison
of both approaches.
Budgeting, from the whole to the parts (top-down): Budgeting from parts to the whole (bottom-up):
• available from budget
• determined from comparable projects
• given by budget frameworks
• financeable from non-exhausted reserves
• calculated by design-to-cost methods
• oriented towards sales policies
Free distribution of means in given/available budget
framework
• based on pre-studies
• oriented to project structure
• determined through estimates
• set by prices and offers
• captured with cost-plus methods
• calculated as necessary efforts
Budget calculation from pre-calculated elements, titles
and cost centers
Figure 27 | Comparison: Bottom-up and top-down approaches for budgeting.
The bottom-up approach is recommended due to its higher accuracy.
The following types of costs are relevant to determine the costs of a project:
– Staff costs
– Other costs
– Material costs
– Travel costs (especially for international projects)
– Financing costs
The staff costs for a procedure are calculated according to the following formula:
Staff costs (Euros) =
Effort (PT) * specific costs for each worker and day (Euros/P/T)
The costs of a project are determined on the basis of the work packets, and follow the structure of
a project breakdown. In Fig. 28, budgeting is presented for a work packet with three procedures.
No. Process estimated
effort (PT)
Special costs
Employees
(€/P/T)
Staff costs
(€)
Other costs
(€)
Total
costs
(€)
1 Work packet 27 20100 500 20500