Cost and EVM
Why is project cost so difficult to manage in a project?
Cost is the “unknown” factor and that is just a portion of why it is difficult to manage in a project. According to the article Project Management 101 - Part 4 - Cost Management, it states that cost is “a task that requires the project manager's careful attention…and to focus on the critical ones (the cost/task)” (Reh, N.d.).
Another factor is when creating the budget, the cost is just an “estimate” and when creating the budget for the “unknown, the project should include a design allowance. This is the amount of money set aside for a “just in case” situation (Reh, N.d.). One of the largest factors in managing costs would be “staying on budget” (Reh, N.d.). It states, “To maximize your chances of meeting your project budget, meet your project schedule. The most common cause of blown budgets is blown schedules (Reh, N.d.)”. While many watch the schedule and stay on track, some still “overrun” it.
A few of the issues with an “overrun” budget is still closely related to the schedule, however, it is noted to “identify such possible sources of cost overruns early” as early is the key (Markgraf, N.d.). A few of the major factors for an overrun budget would be closely related to: “Estimates, design, planning and scope” (Markgraf, N.d.). These four culprits will cause overrun within a project if not carefully “monitored”. Scope is the largest predator. If any changes occur within the scope it needs “new requirements and usually higher costs” (Markgraf, N.d.).
To help with eliminating overruns and budgeting “better” it was suggested “if a major problem pops up, you must use issues management regardless of what other aspects of project management you're using before, during, or after that time (Mochal, 2009)”.
Issue management is a process explained in the article Master these 10 processes to sharpen your project management skills. The article mentions many processes that must be followed but to focus on creating a better budget only a few processes are being mentioned as many of the processes are known. “Issue management consists of two major components: The first is having a process to uncover issues, determine their impact on the project and second is applying specific problem-solving techniques (Mochal, 2009)”.
These two components when relating to issues can really improve the project and try to stay within the budget. These techniques are really not thought until the project has actually started and then it may be too late to plan. Always plan for the problem as most projects, no matter how well or thought out the project is, still change.