The estimation and management of cost over the life cycle of metallurgical research projects

Abstract

The purpose of this study is to determine whether all costs over the life cycle of metallurgical research projects are included in the initial cost estimate, whether these costs are estimated accurately and whether they are managed throughout the project’s life cycle. The impetus for this study came from the observation that costs in metallurgical research projects are often not accurately estimated and are not managed over the entire life cycle of these projects. Cost estimation and cost management over the life cycle of a project were an integral part of the project and crucial to its success. The initial cost estimate can seal a project’s financial fate. Projects often overrun estimated costs because the costs are not estimated accurately enough and not well managed. The project leaders of metallurgical research projects are engineers and not always trained to estimate and manage costs effectively. Project management textbooks are of little assistance in this regard because they tend to focus on timeous delivery, and fail to include enough information on cost estimation and cost management. To facilitate an effective and objective analysis of the survey, an extensive literature review was conducted. Life cycle costing, methods of cost estimation and cost management techniques were examined in detail. An empirical study was conducted to determine whether these methods of cost estimation and cost management are being used over the entire life cycle of metallurgical research projects, and whether all costs are being included in the initial estimates of costs. It was deemed that results of the empirical study would provide useful information on the factors contributing to the success, failure or early termination of these projects. This study is a descriptive research study. The research methods used in the research design were structured and quantitative. A survey was used to gather information by way of face-to-face and telephonic interviews as well as an e-mail questionnaire. The population was small and consisted of the entities involved in metallurgical research projects in South Africa. There were only 12 entities in the population. The 10 largest entities in terms of project size were selected. A nonprobability sampling approach was used. The e-mail questionnaires were analysed manually by means of spread sheets to obtain graphical information. The processed data were used to draw conclusions. The answers to the questions were linked to the theoretical framework by means of interpretation. It was concluded that all costs over the life cycle of metallurgical research projects are not taken into account in the initial cost estimate of a project, and the cost estimates may therefore not be accurate. The final costs, including discontinuation costs, are often not included in the cost estimates. The costs are mainly managed during the growth phase of a project and not during the introduction phase when 80% of the costs are normally committed. This study emphasises the importance of including all costs during a project’s life cycle, and introduces engineers to modern cost management techniques. Copyright