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Project

Project Budget
Budget Estimating,
Estimating,
Cost
Cost Justification
Justification &
&
Proposal
Proposal Writing
Writing The
The Final
Final
Touches
Touches
EGGN
EGGN491-Sr.
491-Sr.Design
Design11
By
By
Doug
DougSutton
Sutton

OVERVIEW
Project Estimate Worksheet
Cost Justification Methods refresher
Class Economic Justification Problem
Final Suggestions for your Proposals

PROPOSED PROJECT BUDGET WORKSHEET


DIRECT COSTS
A. Special labor and subcontracts required for the project
Complete this section only if outside assistance is anticipated
on your project.
Technician (external, if needed on project) (Est. hours) x ($75/hr)
Machinist (external, if needed on project)

(Est. hours) x ($50/hr)

$x,xxx.xx
=

$x,xxx.xx

Other reqd. labor/subcontracts for project (Est. hours) x (Est. hourly rate) =
$x,xxx.xx

(#1) Total estimated labor expenxes-- $x,xxx.xx

B. Estimated Materials Cost Summary


Item description

Material
Pipe

Cost/Unit
$5/ft

No. Units
50 ft.

Mat.Cost
$250

Item description (continue tabulation for all parts and materials needed for project)
Note: Be sure to include any special manufacturing costs

(#2) Total estimated materials-->

Tot. Cost>> = $X,XXX

INDIRECT COSTS
Travel (@ $.39/ mile
Drawings/Plots @ $2/sq. ft.
Reproduction of specs. and drawings

$500
48
50

(#3) Total of indirect project costs-> Tot. Cost>> = $X,XXX

PROJECT COST SUMMARY


(#4) Total of Estimated Costs (#1 + #2 + #3) = $x,xxx.xx
(Direct Materials & Labor + Indirect Costs)
+10% Contingency (#4 x 0.10)
TOTAL ESTIMATED PROJECT COST =

$xx.xx

$x,xxx.xx

ANTICIPATED PROJECT FUNDING SUMMARY


(#5) Sr. Design Course Funds Available =
(#6) Amount of client funding, if known =
(#7) Other known sources of funds
=
AMOUNT CURRENTLY UN-FUNDED
(Total Estimated Project Cost - Sum of #5 to #7)

$200.00
$x,xxx.xx
$x,xxx.xx
=

$x,xxx.xx

*Note: Enter the TOTAL ESTIMATED PROJECT COST and


the AMOUNT CURRENTLY UNFUNDED on the Cover Sheet

ESTIMATING RESOURCES:
The Thomas Register see new link on website
The Sweets Catalogs Available at the SDC
PARTSPEC CD-ROM Available for checkout
in the Sr. Design office.
The RS Means Construction Estimating Guide
When all else fails, try the Yellow Pages!

On behalf of your client, can you


identify any anticipated revenue
stream or cost saving stream that
will result from your project?
If the answer is Yes, then complete
the PROJECT ECONOMIC
JUSTIFICATION section of the
worksheet.

CASH FLOW FORECAST


Consider Incremental Cash Flows Only
After-tax basis
Ignore Sunk Costs

VALUATION METHODS
Average Rate of Return (ARR)
Payback
Net Present Value (NPV)
Internal Rate of Return (IRR)
Profitability Index (PI)

Or any other method required by your client

Given: After-tax cash flow, no.


of years, and the investment
ARR = Annual After Tax Profits / Investment
Payback = No. of years to recover the
Investment
NPV = Present Value of Cash Inflows
Investment
IRR = The return on investment that makes
NPV = 0
PI = The Profitability Index > 1.0

Work Sample Problem

Sample Problem Answers


1.
2.
3.
4.

ARR = $2,100/$18,000 = 11.67%


Payback Period = $18,000/$5,700 = 3.16 yrs.
NPV = ($5,700 x 3.605) - $18,000 = $2,549
IRR = $18,000/$5,700 = 3.15 Between 17%
and 18% in the interest tables
5. PI = $20,549/$18,000 = 1.14

Other Possible Project Selection


Criteria Governmental Agency Rev. (savings) > Cost
Non- Agency Overstate cost to justify
Utility Required profit by law or for safety
Private company Maximize owners equity
Public company Maximize shareholders wealth

How The Course Assignments Fit Into Your Final Proposal


Proposal Sections:
Letter of Transmittal --------->>
Transmittal
Title Page
Executive Summary
Table of Contents
List of Figures
Letter of Intent ------------------>>
Introduction
QFD Summary ------------------>>
Design Objectives
FMEA Analysis------------------>
Product, System, or Process
WBS--------------------------------
Division of Responsibility
MS Project Schedule----------
Project Schedule
Project Budget/Econ. Just.---
Budget & Economic Jusitication
Resume -------------------------->>
Qualifications
Bibliography
QFD/FMEA/House of Quality --->> Appendices
Glossary

Proposal Writing The Final


Touches

1st Drafts/Peer Review - April 19th: 4 copies of


your complete proposals!!!!!

Check List and Editing Thoughts


Review the earlier lecture on the subject of
proposal writing
Check List (see EGGN 491 website) for each
section to be used in the peer review on April
19th Each team needs 4 copies!
Some reminders for editing
A reminder to use Writing As An Engineer
Recommendation to use your roommate or
friend to review document!!

Areas Where We Generally Find


Problems
Introduction
Clarifies background and origin of project
Should be written in past tense and include:
History of problem
Literature search
Any additional information that clarifies your
position on the project
A road map for the rest of the document

Keep relatively short

Areas Where We Generally Find


Problems - Continued
Design Objectives
Use a bulleted list of client requirements,
constraints, and criteria for project selection
Insert a summary of your QFD results, but put
the QFD/HOQ in the appendix.
Keep relatively short and to the point

Areas Where We Generally Find


Problems - Continued
Proposed Product, System, or Process
Definition (Your proposed solution)
This is the heart of your proposal and will probably
be the longest section
Use future tense (i.e. We propose) and readerbased prose
Insert a discussion on Safety & Liability with key
results from your FMEA (put FMEA in the
appendix)
After reading this section, is it clear what you will do
during the 2nd semester and what you will deliver to
your client?

Areas Where We Generally Find


Problems - Continued
Division of Responsibility, Project Schedule,
and Qualifications
Dont forget your Work Breakdown Structure
Explain how you intend to manage your project who will
do what and why are they qualified for that work.
Summarize your key milestone dates in the text, but put
your project schedule in the appendix
Your project schedule should be for the 2 nd semester only

Write in future tense

Proposal Formatting Issues


Double-space the entire document
25 page maximum exclusive of appendices
Letter of Transmittal and Executive Summary are
stand alone documents
Review the RFP on the EGGN 491 website for other
formatting requirements
Be very aware of grammar, spelling, punctuation,
and confusing sentences.
Remember, this is a marketing document. So, use
graphics and pictures effectively!

2nd Semester Schedule is due on April 9th


EGGN 492 Trade Fair April 10th
Preliminary Budget Worksheet is due with your 1st
draft proposals on Thursday, April 19, 2007 Note:
All teams to bring 4 copies to Peer Review!

Any Questions?