How to allocate a project overhead.

[DaiPao]

How do I allocate project fixed overhead costs ie office rental, that are incurred throughout the period of the project.

As they are constant over time independant of the level and number of activities occurring I am not sure how to incorporate them into my cost reporting.

 

[IRstuff]

One way is to divide the fixed costs by 155 hrs/mth or whichever is your favorite number and add that to the G&A per hr.

As there are a possible 173 hrs/mnth of work hrs, some of the other hrs can also be allocated as part of G&A cost.

TTFN

 

[IRstuff]

Obviously, you could allocate to fewer hrs if you're working fewer hrs, but that's a penalty on your customer for your own inability to load up on hrs.

TTFN

 

[DaiPao]

Hi IRstuff,
Thanks for the advice but please clarify G&A cost .

TTFN

 

[IRstuff]

Military contract G&A is general and adminstration. Usually, labor cost is divided into direct labor, which is the actual salary of the worker.

On top of this is added the "wrap", which includes the added benefits and G&A, which includes overhead.

In some companies, secretarial support is abd overhead cost, while in others, it's a direct cost. Other overhead costs include the allocated floorspace cost, as well as utilities, etc.

Other adders include cost of money and profit, although for simple contracts, there would be less transparency into the breakdown of costs.

TTFN

 

[dhlynch]

So how do you add G&A to the project? Do you add a BLB called "G&A?"

 

[IRstuff]

Depends on how the bid and billing are configured. And how transparent your charges need to be.

In some cases, where charging is done on a T&M basis, you would have to allocate G&A to each engineering hour and each dollar of material. It's up you whether you show this detail to your customer. Material gets wrapped to cover the overhead of maintaining a shipping and receiving, incoming inspection, procurement overhead, etc.

In many cases, such as when you have building or other types of contractors, you pay a flat fee for the job and you assume that G&A and all the other wraps are already included in the final amount.

 

[NigelM]

I personnally don't recommend using MS Project for cost allocating. I recommend you use a specialized software for construction budgeting, programming and control, whicth integrates all direct costs, such as material, labor, equipment, and indirect costs, such as field personnell, field office, administration office, management salaries, etc.
I am from Panama, and we use a software called OPUS. It should exist a wide variety of software in the US for these purposes.

Nigel