Boston's Big Dig, the largest highway project in U.S. history, was originally projected to cost about $2 billion. The price now is over $14 billion. I don't know why they're over budget, but I do know that there has been intense pressure to hold costs down. Maybe part of their problem is the pressure to reduce costs.
Since the need to cut costs suggests that earlier estimates were off, why do we believe the new estimates? They're usually made under extreme time pressure, and with obvious bias. They might even be worse than the estimates they replace.
Yet, we do it and we do it again. Whenever we cut budgets, we risk cutting too much. And then we must deal with a hard truth: if we cut too much, the project will likely cost even more than if we hadn't cut at all.
When we cut too much, new mechanisms — many invisible — kick in, and all are beyond the control of project management. Uncontrolled processes lead to uncontrolled costs, and that's why cutting too much raises costs. Some examples:
- Responding to the call for cuts, people re-estimate their work, knowing that only the "right answers" can save their pieces of the project. Unaware, they bias their estimates. Overruns are inevitable.
- When we charge time to one project and work on another, or when we "borrow" equipment, we're bootlegging. It's widespread, and it's completely off the books.
- Excessive budget
which is hard
- If we believe that we won't gain approval for additional staff, we might be tempted to keep some people we have, even when we don't really need them, because we doubt that we can get them back when we do need them again. So when money is tight, we find some people sitting around.
- Bingeing and purging
- When an organization goes through a sequence of "freezes," it inevitably goes through a matching sequence of thaws. During thaws we grab whatever we can. Often, this grab goes beyond satisfying backlogged needs, and becomes a true binge. Like squirrels burying acorns, we acquire what we can whether we need it or not.
- When budgets are tight, we sometimes defer addressing problems. For example, if a project is late, we shorten testing. This defers discovery of problems, often until after the product ships, when resolving the problems is even more expensive. The project cost is reduced, but the cost to the enterprise climbs dramatically.
One symptom of resource starvation is the urge to make every effort "count" towards the ultimate deliverable. For a discussion of the downside of this approach, see "Trying to Do It Right the First Time Isn't Always Best," Point Lookout for March 14, 2007.
Projects never go quite as planned. We expect that, but we don't expect disaster. How can we get better at spotting disaster when there's still time to prevent it? How to Spot a Troubled Project Before the Trouble Starts is filled with tips for executives, senior managers, managers of project managers, and sponsors of projects in project-oriented organizations. It helps readers learn the subtle cues that indicate that a project is at risk for wreckage in time to do something about it. It's an ebook, but it's about 15% larger than "Who Moved My Cheese?" Just USD 19.95. Order Now! .
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More articles on Project Management:
- See No Evil
- When teams share information among themselves, they have their best opportunity to reach peak performance.
And when some information is withheld within an elite group, the team faces unique risks.
- Shining Some Light on "Going Dark"
- If you're a project manager, and a team member "goes dark" — disappears or refuses to
report how things are going — project risks escalate dramatically. Getting current status becomes
a top priority problem. What can you do?
- Dubious Dealings
- Negotiating contracts with outsourcing suppliers can present ethical dilemmas, even when we try to be
as fair as possible. The negotiation itself can present conflicts of interest. What are those conflicts?
- Projects as Proxy Targets: I
- Some projects have detractors so determined to prevent project success that there's very little they
won't do to create conditions for failure. Here's Part I of a catalog of tactics they use.
- How to Get Out of Firefighting Mode: I
- When new problems pop up one after the other, we describe our response as "firefighting."
We move from fire to fire, putting out flames. How can we end the madness?
See also Project Management for more related articles.
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- And on January 31: Nine Brainstorming Demotivators: I
- The quality of the output of brainstorming sessions is notoriously variable. One source of variation is the enthusiasm of contributors. Here's Part I of a set of nine phenomena that can limit contributions to brainstorm sessions. Available here and by RSS on January 31.
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