- Labor:The cost of the people carrying out the activities
on your project. This could include contract labor. This
is often the largest component of the project budget. - Materials:The cost of items purchased for use in exe-
cuting the project. - Supplies and Equipment:The cost of items consumed
by the project and specifically required to execute the
project. This item could include items that are pur-
chased, leased, or rented. - Facilities:This would be included only if the facilities are
built or purchased solely for the use of the project (in
other words, when it’s part of what the project delivers). - Training:Training specifically required to achieve project
success. This cost is often associated with customer
training during installation or startup. - Travel and Other Miscellaneous Costs:Again, the only
rule is that the cost must be required to execute the
project.
An indirect costis a cost related to supporting the facilities,
general services, and organizational environment within which
the project team functions. It may include the following: - Fringe Benefits: This is the non-payroll component of
workers’ salaries for the project. They’re often calculated
as a simple percentage of direct labor costs and include
Social Security costs, health insurance contributions by
the organization, and profit-sharing plans, to name a few. - Facilities:The cost incurred to maintain the environ-
ment within which the project team functions during the
project. This might include building rent, utility costs,
building maintenance, communications networks, office
supplies, etc. - General and Administrative:The costs of management
and support services, such as secretarial, and the pur-
chasing, accounting, and human resources departments,
as examples.
134 Project Management