This video addresses the most common approach for recovering from project budget problems, trading scope for cost, and how prioritization techniques can assist you as the project manager.
- The one thing you can be assured of when you establish your project plans and spending projections is that it'll never go exactly as you plan. There are way too many variables in the dynamics of the average project. The trick is to know how to adapt and respond to those changes. And this is often done through management of scope. Scope defines the activities that need to be performed to achieve the business benefits of your project. These activities require resources, people, time, or equipment.
You can redefine or adjust your project in terms of its scope. The most powerful way to respond to budget status changes is to examine the trade-offs between budget and project scope. Let's discuss some common approaches to do this. First, you may be asked to increase scope to deliver more features in your project. Let's say you're building a new computer system, and you're asked to add more capability to the solution you're providing. In this instance, there are several questions you should ask.
What's the budget impact going to be? Could I get more funding to accommodate the increase in scope? Can I deliver the scope increase within my current schedule? Are there cost impacts of delivering the project with greater scope that show up at a later date, such as increased quality checks? The answers to these questions will help give you options for accommodating the additional scope. Second, you may be asked to increase your budget to reduce risk.
In this instance, you may produce additional scope items to address a specific risk element, like ensuring you meet government compliance requirements or provide a special product or service requested by your most important customer. However, in other instances, you might reduce scope to address a risk item. For example, taking our new computer system example, you decide to use the latest hardware to maximize the capabilities of the system. As the project progresses, problems with the new hardware are published in the media.
To avoid the risk of having to address those issues, you may reduce scope, produce fewer capabilities to avoid having to use that latest but problematic hardware. Lastly, you may be asked to reduce scope to balance cost overruns or because your overall budget needs to be cut. Your new computer system we've been discussing might have helpful but expensive features. Cutting those out of the project could save you money and time.
Take a look at those first. Compare the potential benefits to the business to what it will cost to actually produce those benefits. Share that comparison with management and make scope reduction recommendations. There are always trade-offs in any scope change. Your job is to help your organization achieve the best outcomes with the budget you have available to you. Diligently examine alternatives. Provide options with impacts to scope and budget, and you'll be well-positioned to assist your project sponsor to make sound business decisions regarding your project.
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.