Project Management

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Topics: Construction, Estimating
Project Overruns in Capital Equipment.
As a general rule how much variation will your project sponsor accept in your final cost or margin ?
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our sponsors rarely accept any over run. In general as a policy we have accept until 10% without asking for permisions. Moreover depending on the project impact and budget we can get different limitations requested by particular sponsors.
There is no set amount or percentage. It depends on the project and it is different from one project to another.
Depends on the organization.
In one of the companies I worked for the process was that each project was independently assessed by a quality assurer and an overall risk ranking (1-10) assigned. For each risk ranking there was a percentage for a management reserve uplift, which could be assigned to the project by the steering committee/sponsor.

I do not remember all details but the uplift for a ranking 9 or 10 was well abobe 20%.
Control estimates will vary widely and by sponsor. The -5% - +10% is one I've run into frequently but I've seen other cases where wider and leaner margins have been used. You also have to look at the materiality of the variance in terms of actual dollars.

I agree with Dora, I have generally seen 10%.

I would say also that the level of precision of the initial estimation varies. It is documented by the cone of uncertainty, see here in the wiki where you'll find a reference to an external link.
Project over runs if flagged well in advanced, justified, agreed upon by project sponsor and proper process is followed is accepted by most clients except were fixed price model was agreed as costing mechanism. If scope creep is the reason for cost over run or vendor increases cost of product/service then this responsibility would fall back on the Project Manager. Project Manager should not use Project contingency fund as a mechanism to hide the cost over run and should be highlighted and explain in cost control.

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