Why cost overrun

When even small errors occur between the administration team, the results can be catastrophic. Furthermore, if lines of communication between administrators are limited, problems that occur on one aspect of a project may not even become known to other project managers until it is too late. Many contractors and owners believe that the best solution for bad administration is to simply increase the size of the administration team.

The logic goes, with more people on the job, administrators will be able to focus specifically on their area of the project. However, this might not be the best solution in the long run as increasing the number of people in administration could lead to collaboration failures that will almost certainly involve a cost overrun. Instead of adding more to your admin team, equip them with the right tools.

Project management software can help play the role of multiple administrators. Unlike traditional administration, software gives a skeleton crew the ability to view the project from multiple angles, keeping up with many possible scenarios at once. Concepts can be changed digitally and compared side by side to previous iterations of the project.

When it comes to human errors in invoicing, accounting, and delivery monitoring that could contribute to overruns, software can also help to reduce this risk.

Administrative errors are rather easy to avoid with a software system that guarantees the accuracy of all project documents and gives alarms for deliveries. With the full extra support digitally, administrators will have full visibility and flexibility into a project to keep operations and logistics running smoothly.

Do your current processes give you the data you need to capture critical project information? Take our free assessment. Measure Now. Design integrity, equipment condition, and quality control are just a few of the many aspects of a project that need to be kept on track during construction. Unfortunately, this does not always go as planned leading to severe cost overruns in construction projects. That being said, even if both sides maintain a professional relationship, some projects are just too large to keep up with every site change and news may travel too slowly across departments.

Improving on-site communication with construction software can reduce some of the issues with site management. With software, calculations and designs can be referred to digitally for a more accurate reading and different scenarios can be tested side by side to see which will bring the better outcome.

Because digital calculations are assured to be precise based on accurate inputs, of course and software designs can be trusted to accurately depict on-site descriptions, decisions can be made quickly based on solid information, not office politics. The right software also provides more opportunity for collaboration.

Online access to designs and scenarios allows for greater communication from remote locations. As the boss, it's always beneficial to visit projects similar to yours — and take copious notes of what went right and what could have gone better, if those project leaders knew then what they know now.

Finally, consider breaking down projects into smaller, more manageable phases. Psychologically, it can be easier for project participants to approach and execute; in practice, it can force any gaps to the surface sooner rather than later. Like sailing in a boat with a leaky bottom, setting sail on a project that has been underbid virtually seals it for a budget overrun unless cuts are made in other places.

Guard against this cost overrun by putting your project in the hands of an experienced hand right from the start and comparing the bid to the cost of similar projects.

Then ask your project leader to sit down and provide a comprehensive breakdown of each component of the project and its associated costs. Such a disclosure can help expose even accidental oversights. You can see the triumvirate forming before your eyes: a project whose complexity has been underestimated can lead to unrealistic cost estimates and then problems when it comes to financing.

And if financing dries up in the middle of a project, it can come to a grinding halt, all of which proves that project management is part art, part science. Guard against this cost overrun having a frank conversation with your lenders about what they can do if you run into financing trouble. Having a back-up plan in place — even if you don't need it — probably won't be cheap, but it could spare you the much bigger expense of a stalled project. During the course of any project, it's fair to expect at least a few delays.

All the moving parts, and people, practically guarantee that something or someone will not perform as planned. But as you surely know, there's a big difference between an isolated incident and a repetitive problem that can trigger some of the most frustrating causes of cost-escalation in project management. Small-business owners want, and are entitled to, accountability. So when a project runs off the rails because of a lack of leadership on the part of the project leader, it can be painfully obvious who is responsible.

And by that, they mean completing the execution of the work. But the planning and initiation activities that help start a project effectively and with the best possible chance of success. However, an appropriate length of time planning will save you days, weeks and even months of work further down the line, and keep costs in check.

Give project managers the tools they need to adequately track and manage their projects. Good project management software and expense tracking will help you spot early trends and do something about them.

Project managers should be making time each week to review forecast and actual budgets, forecast and actual resource allocation and progress against the project schedule.

With this information, they can address any problem areas before they become too big. All of these seemingly small interactions add more work to the project. In fact, it equals the same revenue for more work, undermining the profitability of a project. In some cases, the situation can get so extreme that the project never closes!

The project team become a group of people delivering ad-hoc enhancements. Another key reason for budget overruns is when lack of stakeholder engagement causes delays. For example, if your project team fail to include a department in the requirements phase, you may be held up later — when you realize they should have been involved. All that costs more and takes more time than if you had identified their requirements at the beginning and built them in from scratch.