Calculating hourly cost rates in project-based industries – part 1; capacity modeling

Authors

  • Jan Emblemsvag Norwegian University of Science and Technology Norway
  • Gary Cokins Analytics-Based Performance Management LLC Cary, North Carolina United States

Keywords:

Earned Value, Activity-Based Costing, subcontracting, shipbuilding, construction, fabrication

Abstract

Hourly cost rates are crucial in project costing due to the substantial proportion of labor cost in projects. Critical in this endeavor is to model capacity correctly. While there is much published on capacity modeling, there is nothing published about capacity modeling in project-based industries. This fact in combination with the fact that it is a contentious topic in corporations, makes it an important topic for research. Therefore, in this paper capacity modeling is analyzed and a revised version of the CAM-I capacity model is proposed for project-based industries. Both an example and a case are provided to allow detailed discussions.

Author Biographies

  • Jan Emblemsvag, Norwegian University of Science and Technology Norway

    Jan Emblemsvåg is the General Manager of Midsund Bruk AS, a leading supplier of pressure vessels and a fully owned subsidiary by National Oilwell Varco. He is also Professor II at Norwegian University of Science and Technology, consultant and speaker. His experience includes management consulting, project-, risk- and operations management and senior management positions in various industries. He is an ambassador to Quality & Risk Norway. He has written several books and dozens of papers. He holds a PhD and M.Sc. at Georgia Institute of Technology and a M.Sc. at Norwegian University of Science and Technology.

  • Gary Cokins, Analytics-Based Performance Management LLC Cary, North Carolina United States

    Gary Cokins is an internationally recognized expert, speaker, and author in enterprise and corporate performance management improvement methods and business analytics. He is the founder of Analytics-Based Performance Management, an advisory firm located in Cary, North Carolina at www.garycokins.com . Gary received a BS degree with honors in Industrial Engineering/Operations Research from Cornell University in 1971. He received his MBA with honors from Northwestern University’s Kellogg School of Management in 1974. Gary began his career as a strategic planner with FMC’s Link-Belt Division and then served as Financial Controller and Operations Manager. In 1981 Gary began his management consulting career first with Deloitte consulting, and then in 1988 with KPMG consulting. In 1992 Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS) now part of HP. From 1997 until 2013 Gary was a Principal Consultant with SAS, a leading provider of business analytics software. His two most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics, and Predictive Business Analytics. His books are published by John Wiley & Sons.

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Published

2022-05-20

Issue

Vol. 7 No. 4 (2020): The Journal of Modern Project Management

Section

Articles-JMPM

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Copyright (c) 2022 Jan Emblemsvag, Gary Cokins

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How to Cite

Calculating hourly cost rates in project-based industries – part 1; capacity modeling. (2022). The Journal of Modern Project Management, 7(4). https://journalmodernpm.com/manuscript/index.php/jmpm/article/view/JMPM02204

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