Project managers need to manage costs on their project. Once your original cist estimate is approved, the sponsor has agreed to pay a certain amount of money for a certain solution. The project manager then strives to meet that financial expectation. If the project ends up costing more than anticipated, the solution may not make as much business sense.
If you find your project is trending over budget, you must first validate the cause. If you can determine the cause, you will have a much better idea of what options are available to try to get back on track. There are a number of techniques you can apply to try to rein in spending to get back within your budget.
Swap Staff
You may need to swap staff to get your project back on budget. This would involve looking for alternative staff that are less costly. In fact, if cost containment is more important then 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.
Eliminate or Replace Non-Labor Costs
Just as with people, it may be possible to utilize less costly materials, supplies, equipment or outsourced services than what was originally anticipated. For instance, you may ask travelers to stay at a discount hotel chain instead of more upscale accommodations. You may have to send one person on a traveling activity, instead of two that were previously planned. You may be able to reuse some equipment from prior projects rather than purchasing new equipment.
In each of these cases, you are attempting to satisfy the original need if possible, but by using a less-costly alternative.
Work Unpaid Overtime
This option takes advantage of the situation where your employee staff does not get paid for overtime. You do not want to over rely on this technique, but it could help in short bursts. If you are toward the end of the project, you may be able to issue comp-time after the project is completed.
Re-bid or Renegotiate External Contracts
You are paying vendors at an agreed upon price. However, if you are over budget, and if the budget is critical, you may need to renegotiate contracts. Note that I am not saying to break a contract. I am saying you would renegotiate if possible. If the vendor agrees with your proposal they will sign an amended contract which will govern future work.
It is also possible that you would buy fewer vendor products or services. For example, maybe you budgeted for 2000 hours of contract labor. Instead of renegotiating the labor rate, perhaps there is a way to use fewer hours.
Last Options - Scope Back the Work or Ask for More Budget
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 if they are still vital. The other alternative of last resort is to request additional budget.
The key point is that you don't jump to this alternative as soon as you start to trend over your budget. You should first try other proactive options to try to get back on budget. You should only fall back on reducing scope or asking for more money if all the other techniques fail.
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