March 21, 2001	Volume 1, Issue 12
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The Cheapest Way to Run a Project Is with Enough Resources

by Rick Brenner

Cost reduction is so common that nearly every project plan today should include budget and schedule for several rounds of reductions. Whenever we cut costs, we risk cutting too much, so it pays to ask, "If we do cut too much, what are the consequences?"

oston'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:

Wishing

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.

Bootlegging

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.

Hoarding Excessive budget
cuts encourage
"underground" behavior,
which is hard
to control

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.

Deferring

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.

Find out if any of this stuff is happening in your organization. If it's increasing, perhaps you're trying to run projects with budgets that are too small.  Top    Next Issue

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.

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More articles on Project Management:

Make a Project Family Album

Like a traditional family album, a project family album has pictures of people, places and events. It builds connections, helps tie the team together, and it can be as much fun to look through as it is to create.

Start a Project Nursery

In a Project Nursery, professionals from across the entire organization collaborate to conceive of new projects. When all organizational elements help decide which projects to investigate, the menu they develop best suits organizational needs and capabilities.

Some Causes of Scope Creep

When we suddenly realize that our project's scope has expanded far beyond its initial boundaries — when we have that how-did-we-ever-get-here feeling — we're experiencing the downside of scope creep. Preventing scope creep starts with understanding how it happens.

Team Thrills

Occasionally we have the experience of belonging to a great team. Thrilling as it is, the experience is rare. How can we make it happen more often?

Films Not About Project Teams: Part II

Here's part two of a list of films and videos about project teams that weren't necessarily meant to be about project teams. Most are available to borrow from the public library, and all are great fun.

See also Project Management for more related articles.

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