23 Jun 2020

Keeping your Project on Budget and Avoiding Project Overruns

Budget
Keeping your Project on Budget and Avoiding Project Overruns

Are you currently facing issues with project overruns? While a lot of projects do have overruns, the good news is there are strategies for ensuring your projects are completed on time and within budget.

A project overrun is the difference between the initially planned budget of a project and the actual cost at completion. It can also refer to projects finishing much later than the established deadline, which impacts your cost performance and even your future projects.

Historically, project overruns are a standard part of big infrastructure projects. The Sydney Opera House project for example, ended up being more than 14 times the initial planned budget. While the initial estimates for the Scottish Parliament Building were projected to be about £10-40 million pounds (around AUD$18-74 million), whereas the final cost of the project was £430 million (around AUD$800 million).

These are just some examples of the many famous cases of project overruns. So why do numerous projects fail to remain on a budget? Let’s have a look at some of the top ways for keeping your project on track and avoiding project overruns:

 

1. FOCUS ON THE SCOPE DEFINITION

A project is only as good as the level of scope definition. So stating that the scope is a crucial part of the project design, planning and estimating is an understatement.

With a detailed scope, all the following processes like estimation, bidding, planning, procurement, design, implementation, and control can be done with higher certainty and accuracy.

 

2. TAKE TIME TO PLAN AND SCHEDULE

An infeasible timeline for a project, or task within a project almost always means employing more resources to finish the project on time, which will eventually cost more than estimated.

The key to success is the integration of the tools for planning and project controls. This reduces the time spent on data handling and decreases the chance of making mistakes.

 

3. ENSURE YOU HAVE A REALISTIC COST ESTIMATE

A project is labelled ‘overrun’ or ‘on the budget’ based on the cost estimate. The quality of an estimate is of utmost importance.

Even if a project has a great level of scope definition, planning, and execution, the final cost at completion could be way off when the estimate itself is inaccurate.



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See more in our report: The Future of Project Management
 


 

4. IDENTIFY THE POTENTIAL RISKS

The universal law when it comes to projects is that a project never goes as planned. That’s why it is important to identify all the potential risks to a project and have a risk management strategy.

Risk identification should be performed early in the project, starting with pre-project planning, even before the preliminary concept is approved, and should continue until the project is completed.


 

5. ENSURE GOOD COMMUNICATION

Communication is the key to effective project performance. Keep everyone involved in the project up to date about changes, assumptions, allotted costs and hours, schedule, requirements, and standards.

Failure to communicate effectively may mean that you only notice a problem after it is too late to implement corrective action in time.

 

6. USE DEDICATED PROJECT CONTROLS SOFTWARE

As mentioned earlier, change is inevitable. Project cost management ensures realistic project planning, accurate cost estimating, proper cost control, and project benchmarking.

Effective project cost management requires the use of a dedicated cost management software system to ensure that the processes are standardised and an accurate and reliable insight is given into the project progress and status.

 


When it comes to avoiding project overruns, as an owner/ project manager you have to be proactive in your approach. Establish the scope of your project with a high level of detail, plan correspondingly and use a dedicated project cost management system that integrates your cost estimating, cost control and project analysis. This will help you go a long way in the end result of your project’s performance.
 


Author: This article was written by Naveen IIangovan, Cost Engineer at Cleopatra Enterprise.
 


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