Using models for Project Costing

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Ford, David
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Posts: 1
Joined: Fri Mar 29, 2002 3:39 am

Using models for Project Costing

Post by Ford, David »

A few thoughts re Project Costing with SD...I have used two basic
approaches, with variations.

1. Apply unit costs to resource quantities. Costs per time unit are the
product of the temporal unit cost (i.e. $/time unit) and the quantity of
each type of resources. For example Average salary[$/(person-month)] *
Headcount [persons] = Labor cost [$/month]. Aggregate over the duration
of the project to get total costs of the resource. For labor the unit
costs can include burden and overhead and profit (less likely) or those
things can be added separately (typically as fractions of direct labor
cost).
2. Apply unit costs to doing activities that the resources are applied
to. Using this approach costs per unit time are the product of the unit
cost of performing an activity and the rate at which that activity is
being performed. For example Unit cost of reworking a work package
[$/work packages] * Rework rate [work packages / week] = Rework Cost
[$/week].

In addition, there are ""pure"" activity or event costs that get added,
such as permits fees, penalties for completing after a deadline, or
exercise costs if an option to improve technology is chosen. These are
very problem-specific.

My last thought is that there may be a need to discount costs and income
to a single point in time (typically the beginning of the project) to
combine and compare. There may be a built in function that you can use
to do this but I recommend that you build the structure into your model
yourself to be sure that you understand it and know what the model is
doing and why. The structure is simple and we have to understand the
concepts from other domains that we build into our models. Enough of my
preaching as if you are my students...

Best wishes,


Dave Ford
From: ""Ford, David"" <
dford@civil.tamu.edu>
Bill Harris
Senior Member
Posts: 75
Joined: Fri Mar 29, 2002 3:39 am

Using models for Project Costing

Post by Bill Harris »

Chariya Peterson"" <Chariya.Peterson@verizon.net> writes:
>> Has anyone tried using SD on project costing? Would you like to share
>> your experience / success stories?


I wrote a short article for isee systems' Connector once on the topic
(http://www.iseesystems.com/(pwmxldaxedx ... index.html).
It wasn't a closed-loop model, but it did do better IMHO than a
spreadsheet model at relating the structure of the project to the cost
and revenue cash flows and at helping us to finish our plan quickly and
with confidence.

Bill
From: Bill Harris <bill_harris@facilitatedsystems.com>

-- Bill Harris 3217 102nd Place SE Facilitated Systems Everett, WA 98208 USA
http://facilitatedsystems.com/ phone: +1 425 337-5541
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