The Project Notebook

Cheapest isn’t Always Least Expensive

When selecting any resource of any type for a project, always keep in mind the automatic selection of the “cheapest” won’t always be the least expensive option. This is why we have competitive bidding for major contracts — we get a peek at the other dimensions. Does the resource meet our need? Will our requirements be met? Will quality meet our standards?

Let’s suppose we can choose between 3 “near shore” programmers working for $20 an hour each or a local programmer making $80,000 per year (or approximately $40 per hour). All facts considered, we are paying the near shore programmers $60 per hour or $20 more per hour than the local programmer. Now we also need to look at their track record — what is their history of project delivery — to assist in making the right decision. If the near shore programmers can deliver in less time and higher quality, they may be the right choice.

Some of you may remember the 4 Hour House, a project/competition sponsored by the San Diego Building Association in 1983. After one practice run, two teams built two houses in under 6 hours, and in the actual competition the winning team finished in 2 hours and 45 minutes, considerably less than the 3 hours and 39 minutes reflected in the project plan. In his book Project Planning, Scheduling, and Control, James Lewis points out one of his seminar students calculated the house with 350 workers actually cost less to build with a house with fewer workers over a longer time period. Building a house this quickly has another advantage too — it can be taken to market and sold more quickly, providing both a market presence and capital advantage.

So when selecting your project resources, whether team members or materials, always weigh all the dimensions and qualifications before making your choice.

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© 2010-2012 Ray W. Frohnhoefer, MBA, PMP, CCP