Managing both project success and client expectations, along with sticking to internal objectives, are priorities for any organisation. No matter the size of a business or organisation, project costs and budgets are set in accordance with project goals.
However, reality begs to differ. Research shows that 57% of organisational projects finished within their initial budgets, with the others exceeding the target they had set for themselves. This can (and will!) negatively impact both big and small businesses. Cost overruns will not only impact their margins, but also hinder the ability to execute future projects. This could especially spell disaster to large projects such as construction work.
Organisations can benefit from knowing what project cost management is and how to use it effectively to stay on track. Let’s take a look at the definition, advantages, and implementation procedures of project cost management
Project Cost Management: The Definition
Project cost management is the process of estimating, budgeting, and controlling costs throughout a project’s duration or life cycle, with the objective of keeping expenditures within the organisation-approved budget. The ones responsible for deciding on the budget vary with each project, however most of the time they are stakeholders of the organisation.
A successful project:
- Delivers on its requirements and scope
- High quality execution standard
- Completed within schedule
- Completed within budget
As a result, project cost management is a fundamental component of project management and is important in all industries, including manufacturing, retail, technology, and especially construction. Setting up a financial baseline makes it easier for project managers to assess the present state of their project costs, and adjust the course as necessary.
Why Is It Important?
Let’s explain it with a simple, real-life example – buying a landed property.
After deciding to build a house on said property, you start to calculate the budget. Then, the next task is to break down a high-level budget into costs for the house’s smaller items and sub-tasks once you have a general idea of how much to spend on it.
Critical decision points like which designer to hire—a high-end one who will build and deliver the project from beginning to end, or someone who can help with a few parts and be able to work for a reduced price—will be determined by the budget. How many stories would the house have, and how many rooms? What quality of materials should be used? Without a predetermined budget, it is not only challenging to respond to these queries, but it also becomes impossible to gauge your progress once the project is underway. As a construction project manager, you’ll be swimming knee-deep in issues.
In large organisations such as construction and engineering industries, the scale of this challenge is further magnified due to issues such as:
- Concurrent running of multiple projects
- Changes in plans
- Additional unexpected costs
By implementing efficient cost management practices, project managers can:
- Set expectations with core stakeholders and/or clients
- Track project progress and risk management
- Maintain expected margins and increase return-on-investment
- Generate reports to benchmark for future projects and track long-term cost trends
Let BlueTec Handle Cost Management For You
Allow BlueTec to ensure your project costs never exceed your projected budget. Reach out to us today to tell us about your project, and a friendly BlueTec M&E consultant will be ready to assist. If you’re interested in learning more about what we do, visit us at our website.
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