Saturday, August 08, 2009

Rule of Thumb for calculating resource costs

I have a good friend, Mike, who works for the government. We were talking the other day about resource costs (we were speaking hypothetically, we didn't exchange any proprietary information). As a Project Manager, I've always thought in terms of resource costs as dollars per hour and sometimes as dollars per day. But, Mike was talking about resources in terms of thousands of dollars per year.

I can see that for PMs, this would be a much better way to measure resource costs on a project.
You can use the rule of thumb of 2000 hours per year to multiply by the hourly fully-loaded rate to get the yearly rate.

Of course, if the resource is only working for 6 months you can easily divide by two. Or, if the resource is only quarter time or a quarter of the year you can divide by 4.

It's all straight forward, but I find it easier to look at resource costs in this $1000/yr view. It also makes it so much easier to add up resources quickly to estimate project costs.

Resource A is $100/hr with 30% overhead. This translates to $130/hr or $260,000/yr
Resource B is $140/hr with 50% overhead. This translates to $210/hr or $420,000/yr
If I have a project (or task) with 2 A resources and 3 B's, the that's $520K plus #1260K= $1780K/yr
If it's a six month project (or task), then that's $890K for the project (or task).

I hope this little trick helps you out like it does for me.

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