16.4 The budget: A tool for managing a project’s spending

Question 1

What is a budget in engineering design?

Answer 1

A budget is:

• a tool for managing a project’s spending
• a list of all of the items that will incur an economic cost, organized into some set of logically related categories (e.g., labor and materials)

Question 2

With what process does the estimation of labor budgets usually begin?

Answer 2

Estimating labor budgets usually begins with the analysis of each type of labor required for the tasks of the project, estimated in hours of work, and only then multiplied by a labor rate.

Question 3

How much do engineering firms charge their clients?

Answer 3

Most engineering firms charge between two and four times an employee’s direct compensation when they bill a client for that employee’s time.

Question 4

Why do engineering firms typically charge between two and four times an employee’s direct compensation when they bill a client for that employee’s time?

Answer 4

That multiplier covers fringe benefits, overhead costs, supervision, and profit.

Question 5

What are some important considerations in budgeting for materials in a design project?

Answer 5

In budgeting for materials, in a design project, it is necessary at the outset to think about:

• what sorts of solutions are possible
• to keep in mind what the charter requires

Question 6

When do travel expenses arise?

Answer 6

Travel expenses arise if we:

• need to meet with clients or users,
• have project needs that can only be met with off-site visits

Most organizations have internal rules about travel (e.g., mileage allowances, per diem limits on meal and lodging).

Question 7

What is reflected in the miscellaneous category of budgets?

Answer 7

Many budgets include a “miscellaneous” category.

This reflects a temptation to set aside the following in order to balance later overruns in other project categories:

• resources
• time
• money