Budgets are significantly affected by marketplace factors, your competitors' activities, regulatory factors if they are applicable, and the change appetite of your business. In this video, the instructor discusses preparing your project budget in light of these circumstances.
- It would be awesome if we could run projects with no distractions. No need to worry about business issues, other projects, political posturing, economic trends, or what your competitors are doing. Unfortunately, that isn't realistic. There are several factors that will influence your company's behavior, and need to be considered when building a viable, acceptable project budget. The Project Management Institute calls these enterprise environmental factors.
Let's start with two common internal factors. First, the culture of your organization will determine how your budget will be reviewed. The expectations for your budget's level of detail, and when you'll have to plan for and engage in competitive bidding for vendor products is important to know. These are examples of things that are determined by the culture of your organization. Second, budgeting cycles can have a substantial influence on your budget, and the running of your project.
For example, I ran a large multi-year project for a government organization. Each year, we had to re-plan, re-justify, and produce a full budget renewal package. That work added two person years to our project cost. Commercial organizations often do not have this restriction but may have other budget cycle considerations you'll be wise to understand. Now, here are some external factors. You or your management team probably have little control over these, but their influence on your project can be substantial.
The first external factor is the overall market conditions. If the local economy is growing, or you're lucky enough to be working on the next mobile phone everyone wants, then you may have more flexibility with your project budget. If different market conditions exist, your project budget is more likely to be tightly scrutinized. The second external factor is your competitors. The status of your products against your competitors from a cost and functionality standpoint can have a significant influence on your budget and the scope it supports.
A colleague worked on developing state-of-the-art TV and computer monitors. Companies in this industry are obsessed with improving their product to beat their competitors, so his budget was significant. Working without consideration for this factor can send you back to your budget drawing board. Third, inflation may be present and increases in the cost of goods and services may have to be baked into your project budget. And finally, international considerations may need to be taken into account.
If you're dealing with products or staff location abroad, currency exchange rates can impact your budget as they change frequently. The approach for reviewing and accommodating currency rate changes should be fully understood and acted upon to ensure your budget remains accurate. Similarly, the availability, productivity, and cost of overseas staff may need to be factored in your budget. While outsourcing may save you money, the productivity of remote staff can differ, and contract management may need to be factored into your budget.
Follow these guidelines and you still may have distractions from your project, but your budget will be ready to handle them.
Note: This course follows the latest guidance from Project Management Institute, Inc., as outlined the PMBOK® 6 Guide.
- Recall best practices for project budgeting and estimation.
- Distinguish common estimation approaches used to build project budgets, and understand when to use them.
- Identify best practices for budget expectation management, while utilizing sound budget refinement techniques.
- Describe and explore agile project budgeting techniques.
- Review various approaches for correcting project budget overruns.
- Review sound budget reporting approaches, including how they can be used to report project status.
- Recognize the issues and changes that can put a project budget in jeopardy.