Cost overruns are one of the most troublesome aspects of project management. Working to contain cost should make the top of any project manager's to do list. Material costs go up. Sometimes estimates were low balled to get the job and now the project manager must pull a rabbit out of a hat to get the job anywhere near the projected budget.

The first step is to watch purchasing. If too many people can make purchasing requests that are honored, the opportunity for waste, double purchasing, and overspending are increased dramatically. Even if merchandise can be returned, there is often the cost of return shipping, restocking charges, and labor to pack it up to send it back. Extra unneeded items can also lead to stealing by employees that realize the surplus is available and figure by the time someone sees the mistake, those bricks will be a part of their patio.

Labor costs are another area to monitor. An extra hour here or there on a larger project can become a large pile of money. An even bigger pile will form if the extra hours are at overtime rates. Surplus employees can suck up a lot of dead time that costs you money but produces nothing. Watch employees to see if some are only good at holding a coffee cup or eating a donut. Don't be too slow to move these type of employees out the door.

Employees that don't possess the needed skills are unneeded overhead. If employees have to work too slowly because of unfamiliar equipment or weak job skills, eliminate them and hire people who can actually do the job. If they happen to be your boss's brother-in-law, nephew, or uncle, you may just get to enjoy excess labor costs for this job.

Unforeseen delays can cost money, too. If you have employees that have to sit around waiting for some craftsman to show up to his or her job before your workers can proceed, it can empty you wallet in a hurry. This can also cost if you are working with borrowed funds. Every delay potentially costs you money because of the interest that you have to pay while waiting for the job to be completed.
Also, delays can create increases in material costs if you have to wait to purchase them until certain aspects of the project are completed.

Mistakes cost you money. Anything that you have to tear out and redo is a dollar eater. Wasting material with bad cuts or breaking things before they can be installed continue picking your pocket.

Some project costs can be increased by vagaries in the weather. You can't dig a basement if it's too wet. Some workers can't labor outdoors if it's 15 degrees below zero. Excess heat can create delays, too. Some projects are assessed penalties for not making certain deadlines. Keeping things moving every day is critical to cost control.

Changes on the fly can add cost. It is important to advise a customer if changes are going to add cost to the project. If you don't tell the customer, you get to eat the cost of the change. Again, on a large job this can be a lot of dollars.

Learn more about this author, Allen Teal.
Click here to send author comments or questions.

---

Add your voice

Know something about Managing costs in project management?
We want to hear your view. Write now!