A small number of projects will be completed within target, time and cost budgets. Proper planning is key to project success and few issues go beyond the scope of planning. Time/cost overrun is one of them. It is true that some problems can be avoided by planning and proper execution, but you can never accurately predict what will happen to a project once it begins.
Below is a list of common challenges that lead to time/cost overruns:
1. Insufficient budget
One of the main reasons for budget overruns is insufficient budget. Failing to allocate an adequate time and cost budget to a project at the beginning of the project will obviously lead to time/cost overruns or failure.
2. Infeasible cost estimates
Cost estimation is an important process for a project and a common cause of budget overruns. If budgets are only based on feelings, or are calculated by inexperienced or unqualified personnel, projects will unexpectedly face budget overruns. This may look good in the early stages of a project, but often looks impractical in later stages.
3. Underestimate the complexity of the project
Medium to large projects often have the risk of overrunning time/cost because the larger the project, the greater the complexity that can arise during execution.
4. Extend the project schedule
If the project goes as planned, it does not mean that the project time and cost constraints are also met. On the other hand, if the project schedule is extended, this automatically translates into more time and money that needs to be invested in the project. Project delays mean more time is required to arrange people and resources.
5. Lack of a backup plan
If project management does not include a backup plan for possible problems, even the smallest delay in the plan can lead to overruns.
6. Lack of resource planning, allocation and utilization (the most common mistakes project managers make)
Resource planning, allocation and utilization are aspects most in need of technological-based support in project management. If the software used by the organization cannot match resources on demand based on the skills and available time of the talent pool, and cannot calculate (or recalculate) the load and cost of allocated resources after allocation (or reallocation) in real time, it will be difficult for the project manager to achieve appropriate resource planning, allocation and utilization.
Whatever the reason, if the project manager cannot effectively plan for the resources available, it will obviously lead to budget overruns. One of the most common mistakes that cause overruns is failing to estimate the skills and amount of resources that will be used during the project. On the one hand, they may be underestimated, or there may be resource conflicts after the project starts, but the project manager cannot handle the reallocation of resources well. On the other hand, they can be overvalued, blocking resources that could be used effectively elsewhere.
Time and cost are two common constraints businesses face while launching and managing projects, making effective oversight of these factors a skill that every project manager needs to have. When it comes to efficient project time and cost management, 8Manage PM can help you in:
8Manage PM WBS can break down the team’s work into manageable parts. WBS deliverables are aimed at dividing projects into manageable chunks that can be assessed and monitored, making it easier for project managers to assign and manage individual responsibilities.
8Manage PM provides top-down and bottom-up bidirectional work breakdown and planning of time, resources and costs. Each activity and deliverable in the WBS can be arranged by the project manager and the activity responsible person or the deliverable responsible person in two ways. Time, resources and costs are scheduled to avoid making plans based on feelings.
2. Create a baseline
After creating a project plan, it is important to implement baselines that can be used to track tasks and project performance. 8Manage PM s Baseline feature provides project managers with a set of stored values for projects, which include:
- Original planned start and end dates
- Planned workload
- Estimated cost
- Budgeted income
Having a baseline plan for reference helps to provide an accurate comparison between the initial plan and the actual progress of the work and the projects earned value calculation.
3. Continuously monitor time, resources and fund use
8Manage PM allows you to continuously monitor the use of time, resources and funds for project activities and deliverables. It enables you to consistently recheck the situations to provide accurate status of schedules, resource allocation and cost budget.
4. Manage scope creep and change requirements
8Manage PM supports to define deliverables and use project evaluation and review techniques such as the aforementioned WBS to allocate resources and identify critical paths. The system also provides comprehensive requirement change management. When a requirement change occurs, it will automatically calculate the time and cost impact of the project from the changes in the WBS, and remind the stakeholders of the project.
5. Monitor project progress and performance and predict the time and cost of completing the project
Monitoring project progress and performance provides project managers with indications of activity coordination issues, resource conflicts, and cost overruns. Besides monitoring project progress and performance, 8Manage PM also predicts the time and cost of project completion for the project manager, thereby enhancing his/her insight into the project.