The Magic Position: How a Project Cost Estimator Turned Fast-Tracked Execution Into Profit
- Tellura
- Jul 25
- 4 min read
Have you ever been handed a project with a tight deadline and a tempting bonus for early delivery? Here’s a real-world-inspired case that shows how a skilled project cost estimator turned that pressure into profit.
Background Information
A mechanical installation project required a field crew to complete piping and welding works over a planned duration of 5 weeks. The project team exp
lored whether accelerating completion to 3.5 weeks using overtime labor and offering a performance bonus would be cost-effective.
As the Project Cost Estimator, my task is to determine the most economical path forward.
Understand the Contract Clause and Regulation
Understanding the contract clause and regulation is crucial because it defines the scope, timeline, and financial incentives—such as the bonus for early completion—which directly impact cost planning. It also clarifies labor rules, including allowable overtime and benefit obligations, which influence total crew cost calculations. Without this understanding, estimators risk making inaccurate decisions that could lead to cost overruns or missed profit opportunities.
Contract Clause
Duration - 5 weeks
The bonus if the work finishes in 3.5 weeks is $25,000
Regulation
Workweek—40 hrs
Professionals can work 20 hours per week in overtime.
Fringe benefits = 50%
Overtime factor = 1.5
Understand the Crew Composition
We’re working with 4 categories of workers:
Crew Role | Hourly Rate ($) | Quantity | Fringe Benefits | Standard Hours/Week | Max Overtime |
Welder | $24 | 3 | 50% | 40 | 20 hrs/week |
Plumber | $21 | 4 | 50% | 40 | 20 hrs/week |
General Helper | $16 | 5 | 50% | 40 | 20 hrs/week |
Foreman | $26 | 1 | 50% | 40 | 20 hrs/week |
STEP 1: Let us calculate the total cost per category using:
Total Cost = Hourly Rate × Hours/Week × Quantity × Weeks × (Fringe Benefit)
We can restructure this formula for regular cost (5 weeks) and overtime cost (3.5 weeks).
Regular Cost = Hourly Rate × 40 × Quantity × 5 × (1+0.5)
Overtime Cost = Hourly Rate × 20 × Quantity × 3.5 × 1.5 × (1+0.5)
This accounts for:
Regular wages
Number of people
Total hours over 5 weeks
Fringe benefits (e.g. insurance, leave, etc.)
For Welder (3 people at $24/hour)
Regular (5-weeks)
Regular Cost = $24 x 40 x 3 x 5 x (1+0.5) = $21,600
Overtime (3.5 weeks)
We can calculate the cost without overtime for 3.5 weeks = $24 x 40 x 3 x 3.5 x (1+0.5) = $15,120
We can calculate the cost with overtime for 3.5 weeks = $24 x 1.5 x 20 x 3 x 3.5 x (1+0.5) = $11,340
Total Cost = $15,120 + $11,340 = $26,460
For Plumber (4 people at $21/hour)
Regular (5-weeks)
Regular Cost = $21 x 40 x 4 x 5 x (1+0.5) = $25,200
Overtime (3.5 weeks)
We can calculate the cost without overtime for 3.5 weeks = $21 x 40 x 4 x 3.5 x (1+0.5) = $17,640
We can calculate the cost with overtime for 3.5 weeks = $21 x 1.5 x 20 x 4 x 3.5 x (1+0.5) = $13,230
Total Cost = $17,640 + $13,230 = $30,870
For General Helper (5 people at $16/hour)
Regular (5-weeks)
Regular Cost = $16 x 40 x 5 x 5 x (1+0.5) = $24,000
Overtime (3.5 weeks)
We can calculate the cost without overtime for 3.5 weeks = $16 x 40 x 5 x 3.5 x (1+0.5) = $16,800
We can calculate the cost with overtime for 3.5 weeks = $16 x 1.5 x 20 x 5 x 3.5 x (1+0.5) = $12,600
Total Cost = $16,800 + $12,600 = $29,400
For Foreman (1 person at $26/hour)
Regular (5-weeks)
Regular Cost = $26 x 40 x 1 x 5 x (1+0.5) = $7,800
Overtime (3.5 weeks)
We can calculate the cost without overtime for 3.5 weeks = $26 x 40 x 1 x 3.5 x (1+0.5) = $5,460
We can calculate the cost with overtime for 3.5 weeks = $26 x 1.5 x 20 x 1 x 3.5 x (1+0.5) = $4,095
Total Cost = $5,460 + $4,095 = $9,555
TOTAL COST FOR REGULAR WORK
The total cost for all the crew will be = $21,600 + $25,200 + $24,000 + $7,800 = $78,600
TOTAL COST FOR OVERTIME WORK
The total cost for all the crew will be = $26,460 + $30,870 + $29,400 + $9,555 = $96,285
Since we will get $25,000 bonus if the work finishes in 3.5 weeks. Then the Total Cost of all crew for overtime work will be = $96,285 - $25,000 = $71,285
COMPARISON SUMMARY
Option | Total Crew Cost | Bonus Applied | Final Cost | Savings |
5 Weeks | $78,600 | N/A | $78,600 | N/A |
3.5 Weeks (OT) | $96,285 | −$25,000 | $71,285 | $7,315 |
Cost Estimator’s Key Insights
Time–Cost Trade-off: Although overtime increases weekly labor costs, the early completion bonus outweighs the premium, making the 3.5-week plan more cost-effective.
Strategic Incentives Matter: Incentives like bonuses can reframe cost structures and promote faster delivery while maintaining profitability.
Scenario Analysis is Crucial: Presenting both options allowed management to evaluate trade-offs between cost, time, labor pressure, and delivery expectations.
Real-World Value: The savings of $7,315 from early delivery highlights how cost estimators influence financial outcomes and schedule-driven decision-making.
Final Recommendation
It is financially advantageous to accelerate the project timeline to 3.5 weeks. The net cost is lower despite overtime premiums, thanks to the early delivery bonus. Proceed with the 3.5-week execution plan, subject to labor availability and quality control measures.
LEARNING OUTCOME
This case illustrates how project cost estimators play a strategic role in optimizing project delivery—not just through calculating totals, but by analyzing incentive impacts, labor planning, and alternative execution strategies.
Want to Learn This Hands-On?
If you found this insightful, you’ll love our Career Transition to Project Management Program. We teach you exactly how to make these types of calculations, plus:
Practical scheduling
PMI-aligned methods
Hands-on budgeting exercises
👉 Join the next cohort and take your project management skills to the next level.
📅 Next cohort starts: September 22, 2025. check our website for more important details. www.bluetellura.no
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