The use of project cost controls solutions is becoming pretty widespread these days amongst bigger construction organizations that execute on capital projects. For any big, billion dollar project (or any number near that), it’s understood that proper planning, cost controls and detailed progress reporting will be followed on that size of project. They have to. There’s just too much risk otherwise.
You're Not Alone. Project cost overruns are common.
Statistics will tell you that over 85% of projects go over budget. But Why? What are the mechanics behind project cost overruns and project schedule delays? Plenty of talented and experienced professionals engage in dialog about this very topic every day, and try to arrive at conclusions about how to stop projects from going over budget. In this article I’d like to shed some light on the underlying workings as to the root causes of cost overruns and schedule delays. In order to tackle the problem of how to eliminate overruns, it’s important to understand the main reasons why they happen.
1. What is Earned Value Management?
Earned Value Management is a critical Construction Project Management method that enables project managers to forecast project costs and additionally shows current performance and productivity metrics throughout a project's execution.
A must-read article on the effects of change in construction projects by Arthur O’Leary called Coping with Changes during Construction takes a very savvy look at both the reasons changes happen, along with strategies around managing the risk. While O'Leary's focus is on construction projects, this advice and rules are equally valid for projects in any industry that have complexities such as: many moving parts, suppliers, subcontractors, customers, complex WBS, multiple resource types, etc.
Wanting to know where things are at during all stages of a project is a healthy thing to do. Whether you’re the owner, operator or customer, there’s no question that every day of your project, you’ll want to know if things are moving along as expected. And you’ll want to know details; because whether you’re running a $10 million or a $100 million project, going 10% over budget is a lot of money. So you’d better be asking a lot of questions.
Ty is a successful project manager by profession and volunteers as a youth community leader for most of his off-work hours. He decided to make a youth get-together once a week for his kids and their friends. The ultimate goal was to have the boys socialize among a group of kids of similar ages and challenges. Ty told the kids that they needed to brainstorm what to do every week to keep the get-together attractive and enjoyable for everyone. They agreed that they would have a weekly topic to be suggested, and its discussion to be moderated by one of them. The person that suggested a topic was to be prepared by reading and researching about the topic, which was then to be used to challenge the rest of the group. Another activity they agreed upon was to have a weekly lunch together in different places - some of which might even be out of town, in a park, or on a boat to break-up any kind of monotony. They decided also that the cost of every meeting should not exceed fifteen dollars per person.