Reasons For Project Over Budget

Project Management / By

The Project Manager needs to have a very effective tracking method, so that he/she can watch ‘burn’ rate real time. Otherwise there would authorized activities and purchases at a higher rate than expected or unauthorized activities within the budget.

Just watching and approving of activity progress is not enough for the project manager. The manager should outline all the possibilities, assumptions and constraints before starting the actual implementation. An activity could actually require more effort or materials or there may be charges against the activity which shouldn’t be. Training and experience can add a lot to it. If you want to manage it, you must measure it first.

Some recommendations for consideration: 

  • Risk management: Understanding major risks to a project’s success and having a good strategy to manage these risks are a key step to preventing a project from going over budget in the first place. The project manager should have a proactive strategy to minimize the impact to the budget, communicate it in a timely manner to the senior Management.
  • Requirements: Clearly understanding and scoping requirements before starting work is another crucial planning effort. Then comes the time and cost estimation followed by effective communication. As it is necessary to ensure the project team and stakeholders are all on the same page regarding project requirements and expected outcomes before starting the work.
  • Configuration Control: The article addresses key issues with changes causing a project to go over budget. Having a CCB (configuration control board) in place to properly adjudicate and resource change requests before expending resources on those changes is critical to keeping a project in scope.

Trainings can help a project manager to build the skills needed to properly manage a project within the allocated budget. If you experience over Budget the reason can be all or any among –Incomplete scope, weak sponsorship, and improper stakeholder analysis, lack of earned value management and poor risk identification and assessment.
Unforeseen events beyond human control, improper estimations at initial stage, project delay, reworks & corrective actions due to faulty project management. These and there are other many factors can cause projects going over budget.

Risk management, administering contracts, cost estimation, procurement strategy can hold on the budget at a tolerable level as regards to slippage, but in addition budget targets would be won on the front line, meaning a well-crafted, effective and efficient work execution would define the level of success we hope to achieve. Project Managers should walk the field and not rely on boardroom control. There should be regular internal team meetings. Construction projects in particular presents a daily challenges of conflicts on planned against actual (site conditions). This uncertainties in effect will alter targets on time and cost.

A major reason could be a breakdown in Risk Management, due to incomplete identification of risk and inappropriate mitigation strategies. If risks are closely monitored and the impacts of this are communicated to sponsors and stakeholders early, the root cause of the potential budget overruns can be identified and addressed early – whether as project variations or scope, time or cost control strategies.  Team work and objective project review with a strong portfolio manager enables success.

 

About Aditi Malhotra

Aditi Malhotra is the Content Marketing Manager at Whizlabs. Having a Master in Journalism and Mass Communication, she helps businesses stop playing around with Content Marketing and start seeing tangible ROI. A writer by day and a reader by night, she is a fine blend of both reality and fantasy. Apart from her professional commitments, she is also endearing to publish a book authored by her very soon.

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