GEOG 871
Geospatial Technology Project Management

Cost Management


Cost Management

Project cost management includes preparation of the project budget as part of the project planning process and financial management during project execution. Projecting budgeting involves making an estimation of resources required to complete a project. In a project management context, a resource is a tangible entity to which a value may be assigned--value is normally measured in monetary terms. Depending on the type of project, there are a range of cost categories that should be included in cost estimation. Project resources typically include staff time, monetary expenditures, and system or equipment usage. For GIS projects, it is good practice to examine and tabulate all costs that are attributable to the project such as:

  • labor time of the organization's existing staff or new staff hired for the project (normally measured as a monetary rate by time--hour, day, or month);
  • contracted staff (cost for project team members provided through a contract with external organization or company);
  • contracted services--costs for specific deliverables provided, under contract, by a consultant or contractor (e.g., GIS consultant providing GIS design and development services, GIS contractor performing database collection or development, firm providing aerial data collection and processing);
  • computer hardware, network, equipment, and system maintenance and administration services (costs for the purchasing or leasing of computer servers, network devices, desktop computers, mobile devices, survey equipment, etc., and paid services for system maintenance);
  • computer software (costs for licensing of server and desktop software and mobile device apps required for the project). Also may include ongoing costs for Web-based software and applications. This includes cloud-based services, also known as "software as a service" (SaaS). Applications and services provided by the Esri ArcGIS Online service is a prominent example;
  • network and Web services (costs for provision of cellular or broadband communication services, Web hosting services, and related costs);
  • GIS data (costs for the purchasing, licensing, or subscriptions to existing spatial data provided by an outside parties);
  • training (costs for specialized training, such as software training for team members, which is necessary for the project); and
  • travel expenses (costs for ground and air transportation, lodging, meals, and other costs associated with travel required for the project).

Direct and indirect costs are related concepts explained below:

  • The list above presents typical direct costs which are costs for project resources that can traced back and assigned to a project by an organization. The cost of workers on a project is an example of a direct cost. If a project manager is to determine the cost of a day of an employee's efforts, it is important to not only account for his salary, but also the cost of all of the employee's benefits for that month. For longer projects, it may also be necessary to include costs or estimates of salary increases for team members during the project's life cycle. Cost for contracted staff would be defined by applying a contracted rate (e.g., dollars per hour, day, or month). Direct costs also include all monetary expenditures for products and services that must be accounted for in the project budget.
  • Indirect costs represent costs that are incurred by an organization carrying out a project but which are not specifically accounted for or tracked as part of a project.  As such, indirect costs are often tallied for the entire organization, and then prorated to individual projects by the organization. Indirect costs are sometimes called overhead, and includes a range of things such as: building rent and operational costs (utilities, maintenance, custodial services); insurance fees; tax payments; employee training not attributable to a specific project; and costs for office furniture, equipment, and computer hardware which is not accounted for through specific projects. In private companies, staff time which is not billed to a specific project, and therefore does not bring in revenue (marketing and sales staff), is also considered overhead. An indirect cost in one organization may be managed as a direct cost in another. For example, some organizations may have copy machines that keep track of identity numbers and allow copies to be billed back to individual projects. In the past, some GIS labs with processing capability that was high end at the time accounted for and billed projects based on central processing unit (CPU) usage. Many government agencies and private companies account for overhead costs as a "multiplier" applied to employee costs. For instance, private GIS consulting companies typically establish hourly or daily monetary rates that take into account the employee's base salary and benefits along with physical overhead and the company's non-billable employee costs. A company that pays a GIS Analyst a salary of $85,000 per year plus benefits (roughly equivalent to $50/hour), may establish a multiplier of 2.4 to cover overhead as well as expected profit, resulting in a billable rate of $120/hour.