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AboutRead In 6 Minutes
Preventing Budget Nightmares
No project manager wants to be the financial drain the accounting team is never excited to hear from. The bearer of bad news, and the one who realizes the project budget isn’t on-par as to what was originally planned. Over and over the wheels turn and you crunch numbers until it becomes an acrobatic routine. It’s nearing the end of your major project, and you’re frantically looking between the spreadsheets, invoices, and paper trails to identify where all the costs suddenly appeared from. Sweaty palms, heart racing, and jittery hands are tell-tale signs that you have bad news as you approach the CFO. And as you knock on their door, you think, “Where did it all go wrong?” Sure enough, head hanging low and shoulders slumped, you brief your CFO on the financial state of your projects. Truly, a walk of shame.
Who's Responsible for Cost Overruns?
With the number of resources and support available to project teams, it’s a wonder how project managers let the budget become unmanageable. It feels irresponsible, especially for large-scale projects like we see in the construction industry. Do project managers deliberately leave it to the end to figure out the status of their projects and if they are viable? Highly unlikely.
So, let’s not be too hasty and point fingers. It’s not an easy task at hand to keep a large project on budget, and particularly major construction projects. And there are clearly lessons that can be learned from previous projects and managers with successes and failures. But what if these project managers and teams don’t have the tools needed to do their job properly, and ultimately succeed?
Learn About Finance & Cash Flow Planning
Is The Problem More Systemic Than a Problem With The Individuals?
Project controls professionals are skilled in the discipline of controlling project budgets and schedules to ensure a successful outcome. With the right technology, they are deft in the ability to identify issues early on so as to take swift corrective action that will neutralize problems before they become much bigger problems. With this early warning system in place, project controllers are armed with vital indicators for when projects are at risk of going off track. With regularly updated information provided by the system, project managers can report to the CFO and the financial team long before minor events become larger issues. No-one likes surprises – especially CFOs who’ve already completed their cash-flow forecasts for the quarter. So, if out of respect, you hit them early-on with the heads-up that your project is forecasting an overrun that you’re working to correct – they’ll likely be more grateful for your transparency than if you delay the bad news and just hope for the best. And march your walk of shame into their office to brief them on your disaster.
Project Controls for Major Projects
4castplus provides powerful project controls tools that enable users to analyze the current, learn from the past and predict project outcomes. For example, the project team looks at the following to predict where a project is heading based on historical performance:
- Productivity metrics,
- Progress measurements (PC),
- Cost variance (CV),
- Schedule variance (SV),
- Real-time actuals (AC)
- Baseline and current budget (BAC)
- Forecasts (FAC)
These variables are continuously measured to see where the team is at (i.e. how much progress has been made to a snapshot in time, or percent complete), then compared with how much money and effort has been consumed thus far (actual cost). From there, users can review and analyze what was initially planned at the same point of time (planned value – PV). The system can then generate a vast array of EVM calculations and forecasts to produce a clear picture as to where the project is at and where it’s going.
Without effective tools like this, project managers are running blindly throughout the project. Eventually they find out but it’s too late to fix the problems and they have to go ask for more money. Consequently, the walk of shame.
There are No Failures
We get it. There’s a learning curve for everything. Especially new technologies and tools. And in construction, this includes learning how to mitigate cost overruns, delays, information deficits and reporting issues. But, it’s a reminder that the responsibility to improve systems lies with the project management team and top-level management. If project control software is implemented, then there is an early warning system that enables the project managers to take corrective action early on to avoid the disasters. The end result is attainable and the walk of shame can be eliminated. If it’s time to eliminate this occurrence from your company’s projects, then it’s time to reach out to 4castplus and see how we can help you.