Planning a project
Planning a project

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Planning a project

7.4 Equipment costs

In many projects, staff costs are the most expensive element, but there are other costs to consider, such as materials and equipment. Indeed, in some projects (for example, some military and space projects) these other costs are at least as significant as staff costs. For organisational accounting purposes, a distinction will be required between capital expenditure, or the acquisition of fixed assets, and revenue expenditure, or the incurring of expenses. The work breakdown plan and the schedule give information about the nature of each task and this can be used to estimate the costs related to use of materials and equipment.

If the organisation already has whatever equipment is needed, the only costs relating to the project may be those associated with redeploying the equipment for temporary use on the project, including any loss of value through wear and tear. However, if equipment is normally in use elsewhere there will be an opportunity cost incurred in taking it away from its normal use.

Example 5

The consultancy unit of an organisation based in Kent needed an additional fax machine for two months to enable them to take registrations for residential development centres. They borrowed the fax machine from the training unit, where it was used for routine but non-urgent communications. However, the training unit found that many of its usual communications were badly disrupted during this period because people had become used to using the fax. The greatest problem was that many of the trainees in placements in India, Australia and New Zealand, had great difficulty in telephoning the office because of the time zone differences. The loss of the fax machine, even for a short period, proved to be expensive in the time spent compensating for its absence.

Equipment costs are not limited to acquisition costs. Most equipment needs regular maintenance, may break down and need repairing, it will require fuel or energy, and it will need accommodation or garaging and security. All these costs of keeping and operating equipment should be considered. And, someone will probably be needed to work the equipment. This might entail costs relating to skilled use of equipment and supervision and training for staff unfamiliar with the equipment.

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