You have a new project on the horizon and need a project manager to expertly plan, execute and implement. That means you need to start planning a budget. Getting an accurate picture of the costs early on may help you avoid the need to ask for more dollars down the road (which can be a rocky road, to say the least). Here are seven items you should consider from the start.
- Scope: Know what it is that you want the project manager (PM) to do. Be very specific in defining deliverables, expectations, and activities that you need the PM to execute on. Clearly document these activities (with a task list spreadsheet, Statement of Work, or whatever you are accustomed to using). Once documented, confirm them with another future member of the team or perhaps the project sponsor who is funding the project to ensure the list is comprehensive and accurate.
- Duration: How long will you need your project manager? Are you engaging your PM for the full length of the project from initiation to execution? Will your PM be needed for post-production support or for advisory services following implementation of the project? What does that duration look like in terms of number of days?
- Effort: How much effort (in hours) are you expecting from your project manager each day? Do you plan to engage them on a part-time or full-time basis? In most organizations, a “day” is considered eight hours, so full-time would be considered a 40-hour-a-week effort; in others organizations full-time might consist of 35 hours. What does a full day look like for your organization? Calculate the effort times duration to identify the total estimated effort.
- Expenses: Do you anticipate additional expenses other than time? For example, is travel involved? If so, include travel expenses into your budget.
- Contingency: Some organizations require you to plan for and include contingency in your estimates. Contingency is a way of recognizing that unanticipated changes will happen during the project and the effects of those changes could impact costs and timelines. Planning for contingency will help soften the blow to your budget when you need to execute an approved change. If your organization does not have a standard or guideline on the percentage of contingency you should account for in your budget, identify a realistic number and disclose that contingency amount when submitting your budget (e.g. 7% of total cost).
- Leverage Historical Information: Don’t underestimate the value of historical data. Find out what other information successful projects have considered when estimating for project managers in your organization. Review budgets and actuals (if available) from previous projects similar to yours. Talk to people within your organization to gain any ‘lessons learned’ before finalizing your budget.
- Cheaper is Not Always Better: Don’t solely aim for the lowest-priced project manager you can find. Looking at cost in a silo without thinking about the experience and expertise you need from that PM is a big mistake. Get feedback from others on who they have used in the past and find out how efficient the PM was. You may find that paying a little more for an efficient and effective PM will cost you far less in the long run – in terms of money, time and effort.