Effect of Budget Cut During Project Execution

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Tunene
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Hello All,

Please help provide possible answers to the question below:

Identify, and justify 5 different remedial measures that you can take as a project manager in the circumstance that your project was subject to a budget reduction of up to 10-15% four month into the implementation stage of a 18 month project.

I look forward to your response
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begeland
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Tunene-

I have to admit, this one is painful just to read, let alone try to offer a solution or ideas on how to respond to such a cut. I've been subjected to sudden replacement (or loss with no replacement) of key personnel, changes in priorities of tasks by project sponsors based on business process requirements and of course the usual changes in requirements - sometimes very major - but I've not run into a decent size budget cut scenario.

Here are my thoughts:
#1 - Assess the project budget. Are there places where the budget may have been inflated? Can a few tasks be removed from what's left of the project to help make up that 10-15%? Can a key deliverable be removed? Can a report be eliminated now and implemented after deployment if it is truly deemed necessary later on? Scour the requirements and look for things that aren't absolutely necessary that can possibly be removed.

#2 - Assess the project resources. Are you keeping resources on the project that may not be needed? Resources tend to charge to the project even if they aren't doing much - most organizations want to see as close to 100% utilization as possible and if a resource has a project on their plate, they are likely to charge at least some time to it each week. Go lean - manage the budget with an iron fist and see to it that no time is charged to the project that isn't absolutely necessary.

#3 - Look at your outside vendors. If you're using any 3rd party vendors on the project, can you negotiate some better rates on their services or go with a different vendor at this late stage? Of course, it's critical that you don't do something drastic that could cause some failure point on the project...

#4 - Look toward the end of the engagement. Are there things - tasks, activities, deliverables - that you've priced into the engagement near deployment or after deployment that can be eliminated? It's not wise, but you can cut the lessons learned session from the project. Circle back for free with a one on one phone call with sponsor on a lessons learned quick call...it's still better than nothing. Or possibly some documentation deliverables could be eliminated (not wise, but maybe a drastic necessary move) or given away for free.

The key concept may end up being this: if the cut is coming from the customer and they are a valued customer, you may need to just eat that 10-15% and do that dollar amount for free. Retaining them for future business or getting a good referral is likely worth more than the 10-15%. And if the project is internal and the cut is coming from your senior management, then it may be a concerning revelation about your company's financial situation. You still can't do anything about it but decrease services on the project - cutting staff just means someone else has to work harder. It's not likely you'll find one thing to cut to save the 10-15%. It will probably need to be minor reductions in a number of different areas on the project.

Brad
Tunene
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Hi Brad,

Thanks for your response. I am very grateful.

Regards,
Tunene
rattanw
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I agree with Brad, its just plain painful. Budget constraints are just dreadful, especially when quality of deliverable is at stake.

To your specific question, without further details its tough to pinpoint any specific areas, however below are some general thoughts

1. Outsource: is there some portion of the work that can be outsourced. Of course this will have its own challenges but careful outsourcing generally provides cost saving with no compromise on quality

2. Resources: Is your project using too many resources. Have you used technique like resource leveling. Or have you assigned resources to tasks in advance

3. Timelines: how is your project looking overall. Are there any activities on critical path that run a chance of being delayed. Do you have any schedule buffer. If yes, you can look to exploit those.
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