Comments on: Activity Based Costing in Project Management

By: Bill Duncan

Bill Duncan — Wed, 25 Feb 2009 01:09:28 +0000

I think this article misses the point. The main objective of ABC is to ensure that overhead costs are properly allocated. ABC is NOT simply estimating the costs of project activities. It is about deciding HOW to allocate the costs of administrative and management work to each activity.

For many if not most projects, using the traditional cost driver of direct labor hours will be more than adequate.

Duncan

William R. Duncan, Project Management Partners
Primary author of the original version of “A Guide to the Project Management Body of Knowledge”
Board Chair, PMCert, the independent certification body of asapm

By: Travis Anderson

Travis Anderson — Sat, 21 Feb 2009 19:48:08 +0000

Hello Dr. PDG.
I appreciate your insight and wisdom. Please continue to communicate additional pertinent information on ABC. You mentioned it on an earlier post of mine and made me curious. I often seek out your tid-bits and learn from your comments. Keep up the good work.

By: schlossBlog » #143 Activity Based Costing im Projektmanagement

schlossBlog » #143 Activity Based Costing im Projektmanagement — Sat, 21 Feb 2009 10:48:09 +0000

[...] Anderson hat einen lesenswerten Beitrag über den Einsatz von Activity Based Costing im Projektmanagement (Englisch) verfasst. Die Kostenzuordnung auf Aktivitäten orientiert sich dabei an der Work [...]

By: Glen B. Alleman

Glen B. Alleman — Fri, 20 Feb 2009 01:30:43 +0000

Paul,
I suspect we’ll have difficluty here with the narrow band forum. The Work Package is the planning level.
PMBOK states (on page 3 of the WBS Guide),
“The work planned contained in the lowest level WBS components, which are called Work Packages, can be scehduled, cost estimated, monitored, and controlled.”
The “activities” – can I read tasks – are inside the WP’s and are usually not tracked at the activitiy level. The CAM (Control Account Manager) is accountable for reporting physical percent complete at the WP level.
Irregardless of all the possibilities, can the PP&C systems support ABC? The CPR (Contract Performance Report – all 5 formats) and NASA 533M’s are not structured in ABC paradigm.
This is an important discussion. I’m with Wayne Abba and Paul Solomon next month for a brain storming dinner durin the PMI Symposium. This will be a good question to ask them from the DoD point of view.

By: Dr. Paul D. Giammalvo

Dr. Paul D. Giammalvo — Thu, 19 Feb 2009 15:43:19 +0000

Hi Glen,
I don’t know. Maybe construction is significantly different than building airplanes, but the way I always set up the construction WBS was by deliverable and each deliverable consisted of some number of tasks or activities below it. Did it all roll up to the WBS level? Yes, of course. But to be useful as a MANAGEMENT TOOL, I need to know what each activity costs me. Why? Because if an activity is not profitable, then I either need to find out why OR outsource it to a subcontractor who can do it cheaper or more efficiently than I can. I don’t know for sure, but it sounds to me like you aren’t working at the activity level? How can you manage only at the WBS level? (Unless you are outsourcing everything?)

On another topic, how familiar are you with Building Integrated Modeling? (BIM) With BIM, we can turn 3D CAD directly into the cost estimate (4D CAD) and schedule (5D CAD). To make this work, you MUST be able to build up the cost of each object, and the only way to do that is using Activity Based Estimating. Are you familiar with OmniClass? http://www.omniclass.org/ If not, check it out. This is some pretty exciting stuff that finally, after about 10 years, is starting to go mainstream. As soon as I figure out how to insert .png files, I will provide some examples from construction that we use every day.

Gotta run…….

BR,
Dr. PDG