PROJECT MANAGEMENT: REALISTICALLY CONSIDER THE BUDGET

Realistically consider the budget!

A project has five major elements:

1. The budget
2. The schedule
3. The people
4. The resources
5. The rules

Project management has many aspects but all of them fit under these categories.

Why is budget listed first?

Well, isn’t cost usually the first thing the project sponsor brings up?

In fact, isn’t cost frequently brought up in the same conversation that sparked the project idea?

Doesn't it make sense therefore to immediately consider it?

If the sponsor wants to build a new $1 million data center and is suggesting that it can be done for $600,000, then maybe the project idea should be squelched right there and then.

Let's say that you were able to persuade the sponsor to increase the budget to $1 million. Is everything fine? No. It's easy to overlook a related aspect, namely, the scope. Specifically, you want to ensure that the budget is appropriate for the scope of the project. It is time, therefore, to define the scope.

Doesn't this approach run counter to the "normal" process of defining the scope before estimating the budget? On the other hand, doesn't the example given happen more frequently in real life? Reality often does not follow the textbook model. In this case, it certainly doesn't. The budget often precedes the scope although conventional project management thinking says that it should be the other way around.

Let's say that for any number of reasons, many of which were beyond your control, the new data center was finally finished at a total cost of $1.2 million. Now the question is whether you think the sponsor will consider the project successful?

What do you think?

The sponsor will probably not consider it a successful outcome unless they were forced to approve every change and/or activity that increased the total bill by another $200,000. An over-budget situation can be avoided by two things: first, ensure that the budget is appropriate for the project scope, and second, implement a strong change control process over the project cycle.

Where does the project scope fit in? As its own entity, it doesn’t. However, the components that comprise the project scope do. These components are the budget, the schedule, and the resources (including the people). As you can see, the project scope will fit once it is decomposed into its four elements.

It’s human nature to try to get more for you money. It’s suicide to accept a project that has an unrealistically low budget relative to its goal. Let’s keep that in mind.