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Why Do Projects Cost More Than Expected?

July 28, 2008 | Author: PM Hut | Filed under: Project Management Musings

Why Do Projects Cost More Than Expected?
By Ray White

Below are the most common reasons why projects cost more than expected.

1. Forgotten tasks
2. Unknown tasks
3. Customer expectations change
4. Feature creep

As the above ordering states, the biggest issue is always ‘forgotten tasks’. In my experience, forgotten tasks results in project cost overruns more often than any other reason. People tend to throw out a cost before they have listed all the work involved. Halfway down the road, they remember 25 - 50% more tasks. That adds up!

Sometimes, one thing leads to another. Tasks that you didn’t know about pop up. What are you going to do when that happens? You can’t just abandon the project. You have to eat the extra work and absorb the cost overrun.

Once your customer gets a look at the product, s/he may have a few new ideas (customer expectations change). S/he may see something s/he likes, and might suggest some additions. Those add up too. Just make sure you explain that s/he must absorb the additional project costs. Otherwise, you’ll end up eating that too.

Feature creep happens when customers and developers like what they see and want a little more, and a little more, and a little more. Before you know it, there’s an extra 10% cost in the project.

Ray White started building project management software for Lotus Development Corp in 1995. In former lives, he worked as an electrical engineer, developing microprocessor-based computer systems and writing software for them. Mr. White is a founder of Scoutwest, Inc, which publishes two project management products: Standard Time® and Standard Issue®. See www.stdtime.com and www.stdissue.com. Read his blog at www.projectteamblog.com.

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