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Overbudget

Posted: Mon 01 Oct 2012 11:12 pm
by pparames
Hi,

As a PM what will be your first step when you see that project is going over budget?

Re: Overbudget

Posted: Tue 02 Oct 2012 5:27 pm
by dhaughey
First identify the cause of your project going over budget. This will help you understand the options you have to get it back on track. Here are a few things you could do:

1. Reduce Scope
Is it possible to complete the project with less than 100% functionality? Review the remaining work with the customer and negotiate removal of some of it from the project.

2. Use Your Contingency
If wise you will have included some contingency in your initial budget. It is quite usual for a 10% contingency to be included to cover risk and uncertainty. Keep your sponsor advised about the amount of contingency you are using.

3. Use More Productive Resources
If you find some of the people on your project are inexperienced and less productive than the more experienced ones swap them out. The more experienced resource may be more expensive, but often counter the extra cost with their speed.

4. Unpaid Overtime
Not necessarily recommended, but in an emergency you may be able to persuade some team members to work extra hours for no additional pay, assuming they are on an hourly rate. Goodwill will only stretch so far, so this should be a last resort.

Good estimating and change control will help you avoid this situation in the first place.

Duncan

Re: Overbudget

Posted: Wed 03 Oct 2012 10:42 am
by Mohamed.Benmerikhi
Hi there,

Going overbudget is a common occurrence in projects, especially complex projects. Intuitively, the first steps that might be recommended would be as follows:

1. Identify whether the budget overrun is within the 10% contingency,
2. If yes then exercising rigorous budget control for the remaining project phases might be advisable,
3. If not then it would be wise to be tight with the the remaining budget in the coming phases, through renegotiation better prices. Reshuffling the project team might be an option provided it yields budget gains.
4. I believe reducing scope may not be advisable since this might have a negative consequence on project quality. Then again, this would depend a great deal on the type of project and what it involves.

Kind regards,
Mohamed