onemarketplace
Member
Hello guys,
I have just registered in this forum and I do not really know if I am violating the rules with my first question but I am very confuse about how overhead percentages are applied and how to obtain a truly overhead percentage or value. For example this is my idea on how to applied a Project Manager salary to an overhead value or percentage. The reason of my question is because I have talked with our estimators and I think they do not really know how to figure a real overhead. I think the estimation proccess is an art and not an square model.
Let's say I have a project Manager running 4 projects. Three of these projects were sold from 4,000,000.00 to 7,000,000.00 and the other project was sold for about 900,000.00 and I am thinking in using this project manager for a new 8,500,000.0 Hotel-Condo project. Here is my theory:
Let's say this Project Manager earns $ 95,000.00 a year and the new project will take about 3 years.
I will devide his salary in 5 parts (5 projects. Four of them are running)
Project # 1----- 4,500,000.00
Project # 2----- 5,500,000.00
Project # 3----- 6,000,000.00
Project # 4----- 900,000.00
New Project # 5----- 8,000,000.00
-------------------------------------------
Adding all this will be---- 24,900,000.00
Then i will get each project percentage. Then we get
I will devide the salary based on the value of each one.
Project #1 ---- 18.07% of 24,900,000.00
Project #2 ---- 22.09% of 24,900,000.00
Project #3 ---- 24.10% of 24,900,000.00
Project #4 ---- 3.61% of 24,900,000.00
Project #5---- 32.13% of 24,900,000.00
Let's take the guy salary and get the 32.13%. (remember this PM is running all of this projects) so all of his salary goes to these projects.
so 32.13% of 95,000.00 is iqual to $30,523.50 X 3 years = $91,570.50
It is supposed that old projects will end sooner but at the same time others will start.
Of course I have to add FICA which is in Florida 15.3 % of gross and Gas for 2 travel to jobsite weekly for 3 years and health insuranse and of course the
usual gift for project termination.
In 3 years the hour rate for this guy for this project would be
52 weeks X 3 years project schedule = 156 Weeks X 7 days = 1092 days
less 52 weekends X 3 years = 156 weekends * 2 = 312 non-productive days
Billeable work days = 1092 - 312
Billable work days = 1092 - 312 = 780
now 780 billeable days * 8 hours/day = 6240 hours
Hour Rate = $91, 570.00 / 6240 hours = $14.67 per hour
If I tell the PM such salary he would kill me but I am just figuring his contribution to this project and not his overall salary.
Let me know guys if my theory would work ok. Let me know if you know of any book which explain this deeply. I will accept any sugestion and critics.
Thanks
Onemarketplace
I have just registered in this forum and I do not really know if I am violating the rules with my first question but I am very confuse about how overhead percentages are applied and how to obtain a truly overhead percentage or value. For example this is my idea on how to applied a Project Manager salary to an overhead value or percentage. The reason of my question is because I have talked with our estimators and I think they do not really know how to figure a real overhead. I think the estimation proccess is an art and not an square model.
Let's say I have a project Manager running 4 projects. Three of these projects were sold from 4,000,000.00 to 7,000,000.00 and the other project was sold for about 900,000.00 and I am thinking in using this project manager for a new 8,500,000.0 Hotel-Condo project. Here is my theory:
Let's say this Project Manager earns $ 95,000.00 a year and the new project will take about 3 years.
I will devide his salary in 5 parts (5 projects. Four of them are running)
Project # 1----- 4,500,000.00
Project # 2----- 5,500,000.00
Project # 3----- 6,000,000.00
Project # 4----- 900,000.00
New Project # 5----- 8,000,000.00
-------------------------------------------
Adding all this will be---- 24,900,000.00
Then i will get each project percentage. Then we get
I will devide the salary based on the value of each one.
Project #1 ---- 18.07% of 24,900,000.00
Project #2 ---- 22.09% of 24,900,000.00
Project #3 ---- 24.10% of 24,900,000.00
Project #4 ---- 3.61% of 24,900,000.00
Project #5---- 32.13% of 24,900,000.00
Let's take the guy salary and get the 32.13%. (remember this PM is running all of this projects) so all of his salary goes to these projects.
so 32.13% of 95,000.00 is iqual to $30,523.50 X 3 years = $91,570.50
It is supposed that old projects will end sooner but at the same time others will start.
Of course I have to add FICA which is in Florida 15.3 % of gross and Gas for 2 travel to jobsite weekly for 3 years and health insuranse and of course the
usual gift for project termination.
In 3 years the hour rate for this guy for this project would be
52 weeks X 3 years project schedule = 156 Weeks X 7 days = 1092 days
less 52 weekends X 3 years = 156 weekends * 2 = 312 non-productive days
Billeable work days = 1092 - 312
Billable work days = 1092 - 312 = 780
now 780 billeable days * 8 hours/day = 6240 hours
Hour Rate = $91, 570.00 / 6240 hours = $14.67 per hour
If I tell the PM such salary he would kill me but I am just figuring his contribution to this project and not his overall salary.
Let me know guys if my theory would work ok. Let me know if you know of any book which explain this deeply. I will accept any sugestion and critics.
Thanks
Onemarketplace