Project Management

Apply these six techniques to get an over-budget project back on track

Controlling a project budget is difficult, especially when budget reports are released after you need them. If you find yourself trending over budget, these steps can help get things back under control.

Controlling a project budget is more difficult than controlling a project schedule. With a schedule, if you miss a date, you know it. But in most companies, financial information comes in on a lag. For instance, you might not know the financial status of your project for a particular month until the second week of the following month when the budget reports are released.

You also need to know when to recognize expenses. You might recognize an expense when you receive an invoice or perhaps not until you pay it, which may be much later. If your company uses purchase orders, your project may actually get hit with a project charge when the purchase order is generated, even if the actual invoice is not paid until weeks later. Depending on your budget, this may cause expenses to hit early and may make it appear that you're trending over budget, when you really aren't—the expenses are just hitting your budget earlier than you had planned.

If you sense your project is truly trending over budget, you must first identify the cause. Once you do, you'll have a much better idea of what options are available to try to get back on track. A number of techniques can help rein in spending and get your project back within budget.

Technique #1: Work unpaid overtime
Unpaid overtime is usually the first place to look, and a team may rally around the idea just to get a project back on budget in the short term. Of course, the logic is that you can get more work done for the same cost. If you're toward the end of the project, you also may be able to issue comp time after the project is completed. This is a stopgap solution, so I wouldn't recommend using it for very long.

Technique #2: Swap human resources
If you were trending over your deadline, you'd want to swap resources to get your project back on schedule. You'd swap inexperienced and less productive resources for ones that are more experienced and productive.

However, when you're dealing with an over-budget situation, you have a different motivation. You may need to see if there are less expensive resources that can be applied to activities. In fact, if cost containment is more important than deadline, you may be willing for the work to take longer if, ultimately, it can be completed successfully at a reduced cost.

Technique #3: Eliminate or replace nonlabor costs
Just as with people, it may be possible to utilize less costly materials, supplies, or services than were originally budgeted. You may ask travelers to stay at a discount hotel chain instead of more upscale accommodations. You can see whether team members can use existing upgraded hardware instead of new machines. You can substitute less expensive computer-based training or team mentoring for formal training. You may have to send one person on a traveling activity instead of the two you'd planned to send. In each of these cases, you're attempting to satisfy the original need but using a less-costly alternative.

Technique #4: "Zero tolerance" scope change
This technique can be applied to help remedy a project that is over deadline or over budget. Many projects begin to trend over their budget because they are involving more work than was originally committed to. This could be a result of poor scope change management or it could be that small changes are being worked in under the radar screen. However, if you're at risk of missing your budget, you must work with the client and team members to ensure that absolutely no unplanned work is being requested or worked on—even if it's just one hour. All energy should go into cutting costs and completing only the core work that was agreed to.

Technique #5: Use budget contingency (if you have it)
If you're lucky, your initial budget included a contingency to account for the uncertainty and risk associated with your estimate. For instance, it wouldn't be unusual for a project to include a 10 percent contingency. The contingency is separate from the project budget. If you can complete the project within your initial budget, the contingency should all be returned to the company. If you find that your over-budget situation is caused by activities that are costing more than estimated, the contingency budget can be tapped. When you do this, make sure that your sponsor and key stakeholders know, so that you manage expectations about the amount of contingency funding remaining.

Technique #6: Scope back the work
Look at the work remaining and negotiate with the client to remove some of it from the project. If the remaining work is all core to the solution, this discussion still might need to take place as a last resort. It may be possible to complete this project on-budget with less than 100 percent functionality and then to execute a follow-up project to complete the remaining requirements.

Taking action
These are six areas to look at if you're trending over budget. Once you identify the cause of the problem and assess your schedule flexibility, you can determine the best actions to get back on track to hit your budget.
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