Education

8 techniques to get your project back on budget


On most projects, actual expenditures are tracked and reconciled on a monthly basis, since most companies only provide accounting reports monthly.

Let's say you've been doing that but that you've just realized that you're trending overbudget. It may not be time to panic, but you don't want to ignore the situation either. Here are some proactive techniques you can use to get back on budget as quickly as possible.

1.  Swap people. If cost containment is more important than the deadline, you may be willing for the work to take a longer time if it ultimately can be completed successfully at a reduced cost. This technique could also be used to replace a contract resource with an employee resource, if the employee would end up costing less for your project. 2.  Eliminate or reduce non-labor costs. Just as with people, it may be possible to utilize less costly materials, supplies, or services than what was originally budgeted. For instance,
  • You may ask project travelers to stay at a discount hotel chain instead of more upscale accommodations
  • You can see if team members can utilize existing upgraded hardware instead of new machines.
  • You can substitute less expensive computer-based training, or team mentoring, instead of formal training classes.
3.  Implement "zero tolerance" scope change.  You must ensure that no unplanned work is added to your project unless formal scope change management is invoked. This doesn't mean you won't do the extra work. It means that you need to receive incremental budget for all new work you add to the project. 4.  Work unpaid overtime. This option only applies, of course, if your staff doesn't get paid for overtime. If you're getting toward the end of the project, you may be able to issue comp-time after the project is completed. However, this is usually not a good solution if you have to apply it for a long time. 5.  Use budget contingency (if you have it). Your company may allow a budget contingency to account for the uncertainty and risk associated with your estimate. The contingency is separate from the project budget. If you're tending over budget because of estimating errors, you can tap the contingency budget. 6.  Improve processes. On longer projects, you can look for ways to streamline project processes. Work done more efficiently takes less time and costs less. 7.  Renegotiate external contracts. It may be possible to renegotiate license and contract terms. If you use contract labor, you might be able to negotiate a reduced fee. Perhaps your software vendor will take less money for their product. In many cases, the vendor will be willing to trade off one benefit for another. For instance, a contract resource might reduce his rate in exchange for additional work hours. Perhaps a vendor will take less money in exchange for getting paid earlier. If you're overbudget, especially on a large project, all of the vendors should be reviewed for potential cost savings. 8.  Scope back the work. If all else fails and you're not able to get additional budget relief, you may need to negotiate with the client to remove some of the work from the project. There may be options to complete this project on-budget with less that 100% functionality, and then to execute a follow-up project to complete the remaining requirements. This isn't the place to start getting back on budget, but it may be your final option if all other techniques fail or are not available.
8 comments
jacobsonder
jacobsonder

The single most common failure in project management is not acknowledging a foreseeable risk. Technology projects fails again and again due to simple and known risks. Having a focussed risk management process and having a continuously updated risk register, e.g. using a web based risk register such as http://mediumrisk.com, provides the necessary platform for implementing risk mitigation measures in due time, and it also gives the strength to even cancel a project if it is on the wrong course.

mikifin
mikifin

I have yet in over 10 years in the industry seen anyone successfully limit scope.

kevin.peters
kevin.peters

This is not meant to be negative or flaming, just my perception. My first thought is to ask why the project budget is creeping. The answer to this question should point to a possible root cause and therefore a possible solution. My initial read of this article is that each of the points mentioned could be a solution to a root cause issue. Looking at an issue should be similar to looking at a beach ball. The colors change as the ball is turned. In a similar manner, an issue should be explored, or turned, until the root cause is discovered and an acceptable solution is put in place. At one time or another, I have experienced every one of the eight points in the article. 1. Swap people. We all know that situations and circumstances change, especially on projects with a long timeline. At my current employment we are considering options for a project. Two of the options compare the price vs. cost of development and support utilizing internal resources vs. external resources. External resources are pricey, internal resources are costly. If a project is going over budget using external resources exchanging one or two of those resources for internal resources just might be the solution. 2. Eliminate or reduce non-labor costs. Many employers, both public and private, set limits on housing, meals, transportation, etc. - hence the term "per diem". 3. Implement "zero tolerance" scope change. Absolutely! 4. Work unpaid overtime. This is not an hourly issue in my view, this is a salary issue. This is how I view this issue of work. A person interviews for a job. A job offer is placed on the table for consideration. One can accept it, or not (negotiations included.) If accepted, then that person accepts the hours, conditions, and pay. For people in IT working long hours, nights, weekends, holidays, etc. is the norm. I have even had vacations cancelled and trips postponed just to keep a project on time and in budget. If a person doesn't want that type of work then don't enter into that field of endeavor. 5. Use budget contingency (if you have it). As pointed out, some companies do allow for a contingency, however while it is a line item in the plan it is held back by finance as just that, a contingency. The company doesn't want to see it used unless necessary. Regardless of how well a project is scoped and planned issues can arise that were not foreseen - weather conditions, disasters, changes in the market place, employees and contractors coming and leaving, etc. 6. Improve processes. This is one of the under pinning's of Six Sigma Programs. Find ways to improve the processes. Processes can be set in stone - for all the wrong reasons. It is reasonable, even in PM, to question if there is a better way to do something. 7. Renegotiate external contracts. I would offer this view regarding renegotiation of contracts - I don't want the contractor to loose money, however renegotiation might be in their best interest also as it could lead to additional work on future projects with the company and therefore more money into their coffers over the long haul. Many manufacturing companies do this with customers on a regular basis - the customer agrees to purchase product over a longer time period if the company will reduce the price. 8. Scope back the work. Hate to do it, however, been there, done that - enough said. Bottom line, no one wants to have a project go long, over budget, or not meet the customer expectations, however as I have heard it said before - our initial plan was to drain the swamp. :-) Everyone have a great day. kp

I_R_M_E_L
I_R_M_E_L

lol, i figured that would be the Number 1 : Swap people Maybe sooner or later somebody will get the grip on this misconception. If u run out of money , that means u screwed up on the estimate in the first place and u screwed up controlling the project. Now u go and swap (or lay off :D) the people that have been doing their assignements and gained experience in what they do and replace that with someone else, with new issues, like lack of knowledge. Has anyone ever thought of calculating "fuck-up" time ? People do make mistakes, they always will, that's an attribute our species has. But i have yet to find a manager who is smart enough to keep that into account. so, your number one is actually your last choice, and the inevitable one. When you get there you should ask yourself if you might need to be replaced yourself.

delajt
delajt

1. Swap people. While tempting, you have to consider this: You know what you have and will not know what you get in return. It might be more expensive to get a new person on board in your project and the risk is that the new person is even worse 2. Eliminate or reduce non-labor costs. Do you have any idea what a discount hotel chain might do to your project person? Sleepless nights, comparisons with other project people sleeping in decent hotels, bad reputation to yourself as a project manager? "Project manager X is such a cheap git, stay away from him/her" Upgrading existing hardware. Sure, some times it is doable during office hours, but personal experience thought me that it is more expensive than building a new system in parallel, during normal office hours. Training, do it proper, use the vendor standards, or be bitten in the long run. 3. Implement ?zero tolerance? scope change. I am in FULL SUPPORT of this one. I will even take up a clause stating that any scope changes will have to be dealt with after completion of the current project, resulting in a new project. 4. Work unpaid overtime. Never, EVER, rely on this one. Especially if you are in the Netherlands, where usually overtime is 150% during weekdays and 200% in the weekends. Think twice before you adapt this strategy. 5. Use budget contingency (if you have it). Don't forget budget padding. Even if you are 100% sure that you got all the figures straight, add at least 10% extra. You will be remembered as the person who delivers projects within the budget instead of that whiny POS constantly asking for more money. 6. Improve processes. I would state that "learn processes" are more desired than improve processes. Usually, processes are anchored within any given organization so improving them can be very difficult. 7. Renegotiate external contracts. Honor the external contracts. They might have taken months if not years to be signed. Learn them, and use them to your advantage. 8. Scope back the work. Be honest with your customer. Only take on what you think is achievable. Anything beyond that might risk your project. Let the flamewar begin ;-) cheers --delajt

I_R_M_E_L
I_R_M_E_L

turning colors on a beach ball ? ... have another line

michael.willer.dk
michael.willer.dk

I'm with you 100% delajt Reading this post I started to wonder about the long-term effects of implementing some of tips here. I can agree to Scoping back work and implementering zero-tolerance. The rest? Nah. But all PM should have a zero-tolerance to scope creep, even when the project is on budget. Sure flexibility is needed, but freebies wont get you your next project. Delivering on target and above client expectations will. But you can't do that by doing free work. This will get you a happy client, but an overrun budget. Short on the tips: 1. Swap people. New people take time to train. Will you save enough to justify that?? 2. Eliminate non-labour cost By all means, when ever possible. But hotels? Never! The drop in motiviation with your people will cost you more. *Plus* they'll never work for you again. 3. Zero-tolerance All for that one. 4. Non-paid overtime You can do this if possible. But only for a week or so. Then you'll see a drop in productivity and motivation. Plus your team will never work for you again. 5. Budgeet contingency Sure, but be honest with your client. We contracts where contingency is explicit. So there's a trade-off between contingency and scoping down first release. 6. Improve processes Sure if possible. But as delajt said, some may by mandatory and part of company method library. 7. Renegotiate with externals If you really, really don't want to deliver projects with these contractors again. Then this one is a safe bet. 8. Scope back PM classic. Be honest with your client. In everything. Make them see, that this is needed to finish in time, and they might agree. So there you have it. All IMHO, naturally. - michael

jrigdon
jrigdon

looking at the root cause of the potential overbudget and start problem solving early. Outside of PPP that seems to me the quickest and best way to put a stop to losing money.