Introduction
For projects to run smoothly and experience minimal costs and risks, managers need to ensure that they operate within the provided scope, time, and budget. The essence of abiding by the scope, time, and budget transpires because several projects fail to achieve their goals due to issues regarding overruns in costs, delays, or failure to match the required scope. Therefore, by abiding with scope, time, and budget, managers minimize the problems and risks associated with project management and cost overruns. It is paramount to note that when managers fail to align themselves within the project requirements, the project can exceed the budget, extend beyond the provided timeframe, or experience scope variance. Imperatively, cost overruns, extended timeframe, and scope variance are factors that increase the risks associated with the project in question. It is within this context that the paper examines cost control techniques in project environments using the operating cycle, budgeting, earned value measurement systems, and recommends solutions that address cost overruns.
Investigation on the Operating Cycle and Budgeting
Projects have an operating cycle that focuses on the attainment of the intended goals within the provided timeframes. Excellent projects usually beat timeframes and operate within the provided budgets. Practically, the main factors that managers need to consider when investigating the operating cycle of a project include an introduction, implementation, and assessment. The period that the project takes to commence and progress is among the factors that dictate its operating cycle.
According to Flyvbjerg, Holm, and Buhl (2002), the operating cycle of a project usually encompasses aspects such as inception, development, and assessment. As such, in an investigation of the project operating cycle, one needs to check the elements that take place soon after the project commences and asses the progress all through the project’s lifespan. Fundamentally, the period that the project takes to materialize and progress towards its goals and the time when it achieves the desired goals forms the basis of its operating cycle. When managers undertake the right investigation measures on the operating cycle of the project, issues associated with costs and risks become minimal.
Another aspect, which is very important in the quest to minimize costs and control the level of expenditure incurred in a project environment, comprises budgeting. A well-defined budget provides a summary of all the vital expenses and requirements that a project will require from its inception to its completion. With a good budget, individuals can come up with projects that have strategic plans, and in turn, meet their goals under minimal expenditure and time. Budgeting entails careful development of policies and strategies that facilitate the efficient progress of a project in a particular environment right from the beginning to its completion. Guo, Li, and Skitmore (2010) assert that when managers develop budgets that provide authentic expenses and time of operation, costs and risks become minimal, and the project is likely to attain its goals on time. Essentially, managers need to factor in uncertainties that can affect the scope, time, and costs required in developing a project and meeting its desired objectives.
Earned Value Measurement System
To ensure that the project meets the desired goals on time and runs efficiently, one needs to employ the concept of Earned Value Measurement System. The concept is very instrumental in establishing whether the project is on track. By using the measurement system, individuals can easily monitor the progress and performance of a project right from the time of inception to the time the project ends. Earned Value Measurement System provides managers with information on the performance of a project in relation to the provided time, scope, and budget (Munns, & Bjeirmi, 2002). While some projects operate within the required timeframes, they, at times, fail to provide the expected results. Consequently, other projects can use minimal cost but fail to meet the datelines. Therefore, to minimize the issues associated with delays, cost overruns, and scope variance, it is important that individuals employ and use the system of measurement all through the project operations.
Specific Examples on Implementation of the Techniques in Project Plans
Some of the specific examples pertaining to how I would implement these techniques in my project plan include the use of teamwork, use of functional facilities, provision of accurate budgets, and recruitment of competent human resources. In my project, I will ensure that the human resources work together as a team. The essence of teamwork has its basis on the fact that it enhances communication and leads to a productive environment that facilitates exchange of valuable ideas.
Moreover, through teamwork, the project will not only receive insights from the human resources, but will also progress and meet its goals under minimal expenses and risks. Another example that regards how I will implement the techniques in my project concerns the use of functional facilities. According to Cooke-Davies (2002), projects that use facilities that are old usually encounter risks associated with malfunctions and delays. Therefore, use of functional facilities, which meet international standards, is crucial in my quest to beat the timeframe and deliver the expected results.
Proper budgeting and forecasting is another example that explains how I will implement the techniques to minimize costs and reduce risks all through the project. Factors that affect cost control in a project usually include overruns, underestimations, delays, and externalities. To address these factors in my project, I will develop a comprehensive budget that covers all the aspects that the project can advance as it progresses towards its goals. The budget will also consider externalities that can occur in the course of the project. Some of the externalities include calamities and changes in regulations. Consequently, I will hire competent individuals, who will work and deliver the expected results on time. Competent individuals take less time to learn, are creative, and make informed decisions in the course of the project. Since some projects fail and incur unwarranted expenditures due to inadequate skills from their human resources, my initiative to hire competent employees is a good example of implementing a project under minimal risk and cost.
Recommendations on How to Address Cost Overrun Dilemma for Your Project
Effective budgeting
Through effective budgeting, one will be in a good position to address all the costs required by the project and tackle its future requirements. As such, the overruns associated with poorly developed budgets become minimal.
Recruitment of competent human resources for the project
Competent employees are crucial in the progress of any organization. In my project, one has to ensure that the human resources hired have the right qualifications, are team players, have the ability to think critically, and can make wise decisions in the project environment. The recommendation minimizes overruns because it reduces training costs, cost associated with delays, and costs related to poor performance.
Developing clear and attainable goals
In effect, several projects fail to meet their intended goals because the objectives developed are not practical. Goals that are not practical can be those that have poor projection and forecast in relation to time and cost, or those that the project cannot achieve due to its limited capacity. When managers pursue unrealistic goals, they incur costs that lead to overruns and an eventual failure to meet the subject objectives. To address the problem and minimize overruns, one has to develop a project that has practical and realistic goals that it can achieve within a particular timeframe.
Working on order of priorities
Following the order of priorities is another important recommendation that an individual needs to use in my project. By following the order of priorities, the project stays on course and achieves its goals at the right time, scope, and budget.
Conclusion
Projects need to achieve their desired goals at the right time, within the provided budget and schedule. However, several projects incur lots of expenses and overruns and at times fail to provide expected results. Failure to achieve the expected results occurs because some of the projects develop unclear budgets, engage in poor analysis of the project’s operating cycle, or come up with unclear goals. Poor budgets, unclear objectives, and absence of due diligence on the operating cycle of the project initiates a range of financial problems that increase the cost and affect the time and scope of completion. As such, managers need to develop strategies that address these issues and minimize the expenses incurred in implementing the projects. The primary focus of a project is success through achievement of set goals under minimal risks and costs.
References
Cooke-Davies, T. (2002). The ‘‘real’’ success factors on projects. International Journal of Project Management, 20 (1), 185–190.
Flyvbjerg, B., Holm, M., & Buhl, S. (2002). Underestimating Costs in Public Work Projects. APA Journal 68, (3), 279-295.
Guo, H., Li, H., & Skitmore, M. (2010). Life cycle management of construction projects based on Virtual Prototyping technology. Brisbane: Gardens Point.
Munns, A., & Bjeirmi, B. (2002). The role of project management in achieving project success. International Journal of Project Management, 14(2), 81-87.