Resource & Costing in Primavera

Fundamental Logic of Cost Calculation

Project Planning & Management softwares are strictly adhere with mathematical formulas and Concepts. All logics are strongly driven by basic fundamental concepts. These concepts are ideal. Just here we are going to know few main Logics & Formulas behind the relationship of Time, Resource & Cost.

It’s obvious that any project / activity must have definite start & definite finish. It must have definite time frame because it has to fulfill the minimum criteria of ‘definition of the project’.
The Cost of the project is mostly depends on how quickly the project should be delivered. Cost is linked tightly with time.

To complete the Project / Activity on time we must know the answer for the following two questions that questions, what are the resources required? & what is the productivity of the resource? 



Generally the two main factors are Volume of Work & Productivity of the resource / person deduces total man days required for Work. 

Let’s discuss with duration of one Single Activity.

Now the formula is, 
Duration = Work / Units.

Duration in Days (It shall be Hours or Week or Month)

Work in Man days (It’s mostly derived by evaluating acceptable productivity of Labor / Machineries)
Units is No. of resource are required to perform the job.

Here the Work is fixed one. (In some cases Work may vary depends on skill level and productivity of resource) We are going to change the parameters of Duration & Units as per project needs and feasibility. ‘Addition of more resources will reduce the duration of the Activity’. This phrase is very generic and ideal one. In real cases it shall be fit for production based machinery equipment seldom for manpower resources.

Cost = Duration x Units x Per day rate of resource 

Duration is No of days taken by resource to complete the activity
Unit is No of resources involved per day to perform the activity

In other formula I can say that 

Cost = Work x Per day rate of resource
(We know that, Work = Duration x Units )

In Primavera 5.0 and higher versions,

Duration is known as Original Duration, 
Work is known as Budgeted Units &
Units is known as Budgeted Units / Time

Budgeted Cost = Budgeted Units x Price / Unit
( Consider Budgeted Cost as Budgeted Labor Cost).

Budgeted Total Cost is the summation of Budgeted Labor Cost, Budgeted Non-Labor Cost, Budgeted Material Cost and Budgeted Expense.

Model Calculation # 1: 

Q: An activity has 50 days of duration and 1,500 man days of work, how many no of units (Manpower / Day) required to complete the activity on time?

Answer: 
Duration = 50 Days 
Work = 1500 Man Days (Budgeted Units) 
Duration = Work / Units 
Units = Work / Duration 
= 1,500/50

Units (Budgeted Units / Time) = 30 Manpower / day

Q. 1A) If the cost of the labor is USD 10 / Day, Find the Budgeted Labor Cost.

Budgeted Labor Cost = Work * Cost / Day (or) Budgeted Units * Price / Unit 
= 1,500 * 10 
= USD 15,000 /-

Q. 1B) If the material cost is USD 1500 /- and miscellaneous expense or Overheads is USD 500 /- what will be the Budgeted Total Cost? 
Budgeted Total Cost = Bud. Labor Cost + Bud. Non Labor Cost + Bud. Material Cost + Budgeted Expense 
= USD 15,000 + USD 0 + USD 1,500 + USD 500 
Budgeted Total Cost = USD 17,000 /- 

Model Calculation # 2:

But If you are assigning resources the resources are divided in to Labor, Non-Labor & Material Resources. The cost also will be divided accordingly based on the resource types. 

You have to form a slab : Total Formwork Quantity is 1500m2 , a labor can do 10 m2 / day : Lets say the Budget Breakdown came to 1500$ for material, 100$ for labor

When you plan this activity lets assume that you assigned a duration of 10 days to that activity, then when resourcing you should have

A) FWK (Formwork) - This should be a material resource = Budgeted at completion = 1500 m2 , cost per unit = 1 $ / m2

B) Labor (Say Formwork Carpenter) - This should be a Labor Resource - = Unit per day = 1500 / 10 = 150 m2 / day -> 150 (m2/day) /10 (m2/man/.day) = 15 men 
.... So you plug in 15 men / day at a cost of (100/ (10 day * 15)) = 0.66$ / unit

In B above , the net budget will retain the 100$ at completion however it will also ensure that you satisfied the correct manpower needed to do the task