3 Cost Assignment Methods for Project Procurement

3 Cost Assignment Methods for Project Procurements

 

In this article, I want to talk about Cost Assignment Methods for projects.

 

You need to consider the way costs are assigned when establishing the baseline; this is important because the cost should be earned or tracked the same way it is assigned. Here are the methods…

 

#1 50/50 percent rule

50percent credit is given when the activity begins and the remaining 50percent credit is given when the work is completed.

 

For example, if an activity cost $3000 , the activity will receive the other $1500 when the work is completed.

 

The basic assumptions when using this rule is that activities are approximately the same size. This same method can vary in the percentage values. You can also use 25/75 or 75/25 rule. For instance, some of the variants to the 50/50percent rule include 20/80 and 0/100 rule.

 

Cost Assignment Methods

#2 Percentage complete rule

Completion percentage are estimated and assessed at specified reporting interval. This is perhaps the most commonly used rule .

 

#3 Weighted milestone

The total work package value is divided up and assigned to milestone intervals within the work package. Each milestone carries a budgeted value. This value is earned when the milestone is acheived. This method works well for long work packages with multiple activities.

Adeniyi Salau PMP , CCNA R&S , CDMP, CEP, MOS, MCP, CSCU (Project 2016), Microsoft Certified Security and Networking Associate is a Google and Beingcert Certified Digital Marketer, Project Manager and SEO Expert of repute with about a decade of Blogging and online marketing experience. He is always ready to share his experience with others.

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