How to Keep a Project Under Budget
Mike has more than 12 years of project management experience spanning a variety of industries. He has acted as a consultant for federal, state and local government agencies; set up a PMO and managed strategic projects for a major automotive company in Australia; and currently is a Senior Project Manager in the Northern Colorado financial industry. Mike is PMP certified, a veteran of the USAF and has an MBA in finance and accounting.
In layman’s terms, the two most common measures of project success are delivery on time and under budget. You’ve no doubt seen that phrase in job ads, performance reports and countless articles. With Gantt charts, automated scheduling software and so many other resources aimed at delivering projects on time, I’d like to focus this article on keeping projects under budget.
We’ll talk through the basic steps involved with developing a cost estimate, a planning budget plus contingency, and a detailed tracking budget. Following these steps will help you set realistic budgetary expectations and track expenditures to ensure those expectations are met.
Begin with a cost estimate
Many times a project is handed to the project manager with a loose scope and a “budgeted” lump sum amount. That number might have been pulled out of thin air at a planning conference or casually mentioned by a software salesman. It is rarely researched and detailed, but rather just a line item tucked into an overall annual budget by the accounting department.
Controlling expectations is important, and using the term “budget” at this stage of the game implies a lot more detail and finality than we project managers really have. Let’s face it: Unless this is a cookie-cutter project your organization has delivered multiple times, the best one …
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