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Keeping Your Project on Budget

21
Dec

Every submitted proposal or project plan continually emphasizes that the assigned project manager (PM) will ensure tasks remain on schedule and under budget. Typically these are the two most commonly measured data points from the customer’s perspective. Whether it is developing a new weapons system for the Federal Government or remodeling the kitchen in your home, it is important to know when the job will be completed and what the cost will be, with cost being the more important of the two. A project that has gone over budget outside of reasonable expectations, it would not be considered a success, even if it was delivered on schedule and met the customer’s needs. That is why PMs must implement appropriate steps to manage each task to stay on budget.

It is important for PMs to actively participate in the process of determining the project budget. Because they ultimately are held responsible for meeting the budgetary guidelines, they need to evaluate the scope of work to ensure all required resources such as equipment, man hours, travel, suppliers and vendors, consultants, etc.) are included and allocated correctly. If the project is similar to one previously completed, the PM can use this historical data as a baseline to more accurately develop the budget for the current project. If possible, the PM may also choose to include a contingency line item in the budget to cover any unexpected costs that occur during project execution.

A project run without frequent budget management and reforecasting is headed for failure. That is why the PM needs to compare the amount of work completed against expenditures. It is important to use a model that forecasts future cost based on the inputs received from the project team. It is easier to correct a 10% budget overrun than a 40% overrun. Forecasting ensures the PM is monitoring any budget shortcomings and taking actions to address those issues. It is easier to keep a project on track if the PM reviews and continually reforecasting the budget.

It is equally as important for the PM to regularly forecast resource usage. Man hours contribute to the cost of the project; therefore, it is necessary to keep resource usage on track. PMs need to review the number of people currently working on a project and the project’s future resource needs on a weekly basis to ensure they are fully utilizing the available resources and they will have the right resources ready for the remainder of the project.

Scope creep is another area that usually leads to budget overruns. By carefully managing scope, the PM can avoid having unplanned work billed against the project budget. Extra hours should only be authorized if they are actually required and the budget can accommodate the charge. A change order can be initiated to cover these additional charges; however, PMs must also carefully monitor any change requests for work not authorized in the project’s original requirements.

While it is impossible to avoid all risks, the PM must keep and closely monitor a risk register and an issues log. While not all projects require a risk session, the PM should involve all members of the project team in monitoring risks. The PM must have a plan to identify, respond, and mitigate any risks.

The PM must communicate with the project team to ensure all members are aware of the status of the project. They will need to actively contribute if a project needs to be turned around, and they are the PMs first line of defense to ensure a project in on budget. Also, the team members will be more likely to monitor their project charges if they understand the status of the budget.

PMs are held accountable to keep a project’s budget under control. The project budget must be something the PMs review with the project team and other stakeholders, such as their customer, on a regular basis. When budgets are carefully monitored throughout project execution, the PMs enjoy more project successes.