Overhead Cost Project in Project Management – Definition and Meaning
An overhead cost project is a specific, often permanently established ‘project’ or cost collection point within a project management or accounting system that primarily serves to record and manage indirect costs (overhead costs) which cannot be directly assigned to a value-creating customer or development project. It is used to transparently track general or administrative efforts and expenditures. This is typically common in organizations with a large number of projects to provide a central collection point for such overhead costs.
Example, best practice, and additional information
In an IT company, for example, an overhead cost project could be set up to collect costs for ongoing maintenance of internal server infrastructure, general software licenses, or internal training measures that indirectly benefit all projects. A best practice is to define clear criteria and guidelines for which types of costs may be charged to overhead cost projects and how these costs may be reallocated if needed. This is in line with cost allocation principles in the PMBOK Guide and supports agile principles of cost transparency. It enables accurate cost control and cause-based budgeting.
