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166 CONCEPTS AND ISSUES OF BUDGETING

• Resource selection—When we estimate the costs for a task, we generally
make an assumption of the resources that will work on the task. The budget
is set based on that assumption and estimate. However, there may be sev-
eral resource assignment options available to the team. Here’s one example
of how such options can impact upon the cost to perform the task.
The Task: Commercial Communications Division—User’s Guide for Ad-
vanced Messaging System.
The Plan: 100 hrs over a 5-week period.
The Budget: $2,500, based on $25/hr.
• Option 1: Tom, on loan from Military Communications Systems.
Uses extra time to learn CCD methods and style.
Runs up 120 hrs.
Cost is $3,000.
• Option 2: Lou, operating under Parkinson’s Law (Work expands so as
to use all the time available for the work).
Charges 180 hrs (5 wks @ 40 hrs, less 20 hrs on unapplied charges).
Cost is $4,500.
• Option 3: Jim, a new technical writer, requiring review of his work by
a senior writer.
Charges 100 hrs plus 10 hrs @ $35/hr for senior writer.
Cost is $2,850
• Option 4: Alice, “been there, done that.”
Is best for the task, but is overloaded.
Gets assigned to task with approval to work overtime.
Gets job done in 80 hrs, including 40 hrs OT @ $28.50.
Cost is $1,000 (RT) + $1,140 (OT) = $2,140.

From the resource manager’s view, nothing was actually saved because sooner
or later, someone will have to pay the penalties for Tom, Lou, and Jim. But from
the project manager’s view, getting the overworked Alice assigned to the project
saved the project money.

Trap We can see from this example that the cost objectives
and the definition of cost success can be very different for
project managers and functional managers. The project man-
ager is interested in getting the resource on the job that can
perform the work (up to standards) at the lowest cost. The
functional managers’ emphasis is on getting the maximum ap-
plied hours for their staff.