Effective ways to manage an over-budget project



Managing costs is one of the biggest challenges in project management. There are various reasons why & how a project goes over budget. When cost issues occur, then the project manager & / or principal stake will exit quickly. Leaving the whole mountain for someone else to climb and fix. You could be the urgent replacement & new “Hanuman” who will come in with fire and start cleaning the base of the mountain. I have been in similar situations numerous times, and here are the tricks & techniques I used.

Techniques to manage an over-budget project.

1. Identify high level root cause and present it to management.

An over budget project must be highlighted to the management along with the solution proposals. High level root cause must be identified within 2 weeks (ideal timeline) and present it to the project sponsor, steering committee & / or other management stakeholders. Project manager must be able to identify & propose possible solutions & recommendation. Such as additional budget, increase in team members, specialist, or architect support. Let the management & senior stakeholders decide which proposed solution to implement for an over budget project. Or request their approval for your recommended solution, It is imperative.

2. “Zero tolerance” to Project Change Requests (PCR)

It is important to highlight series of scope creep events to the team members, management & clients. Explaining impact of each request for addition or modification on project timeline & budget. Project manager can further propose “Zero tolerance” for all type of project change requests (PCR). It must be approved & supported by client & management. Project team must be informed about project health & strict policies implementation.

It is advised to communicate with all stakeholders on weekly basis via project status report. Stakeholders must be aware of the situation and common objective of completing the project.

3. Create a clear Action Plan.

Once above 2 points are approved, project manager must develop a clear action plan that helps you accomplish the project on duration and with less cost. The plan must recalculate project budget, timeline, resources, frequency along with RACI chart.  Also the plan must be communicated to the project team first followed by other stakeholders.

4. Monitor Action Plan progress on Weekly basis

When project is in flaming red zone then active monitoring is absolutely expected & demanded. It is also important to communicate and progress the remaining project tasks. Active monitoring is required for cost, effort, time & resources. Project manager must motivate the team regularly to progress & reach weekly set targets.

5. Work overtime and minimise cost clocking to the Busted Project

When the budget is gone, and cost is in crunch state. The Project manager must do some not advised activities. One of them is working overtime to get the project back on track. Be honest with your team members and request them to clock less hours for project work if possible. This temporary measure will bring down the overtime and further loss to the project. Again, it is not at all recommended for standard project management.

6. Swap resources

When cost is the concern then cheaper is better strategy is preferred. Regardless of the project manager or stakeholder satisfaction. High ranking & higher skillset resources are expensive. They provide quality and most times less ground work and we require more technical work to move the project. The project manager must with these high ranking & skillset team members and understand the ground level tasks, list them down and identify the less skilled team members who can do it. Once all the information is obtained. All L4, L5, architects, seniors can be released from the project. Replace them with cheaper cost L2 & L3 engineers. Not only the number of engineers will increase but also list of activities will move towards completion. The PM must communicate regularly with L2 & L3. Motivate them, understand where they are stuck and if they need support. Communication & collaboration is the fastest way avoid issue occurrence.

7. Inform the Client that the project will stop if payments are not released on time.

Payments is one of the critical concerns in project management. Government clients are notoriously infamous for holding, delaying, and rejecting payment milestones. However, this cannot be tolerated on any loss incurring project. PM must take this issue to every level of internal management and push for “no payments will stop the work” approach. Approval of such agenda is subject to various factors such as politics, client relationship, escalation etc.

Regardless of where payment matter gets stuck, PM must continue to highlight it in all forums. It is the portfolio or account manager or senior management accountability recover payments and be the escalation point in the event of dispute, rejection or delay by client. It is always advised to consult & seek agreement with internal hierarchy before issuing warning to the client.

8. Request your Team & Partners to provide Support in the situation.

Transparency will help everyone to move forward in such crunch situation. Be transparent with your team & partners as much as required and seek their support in fixing the project. Outline the requirement from each team members & vendor and request their review and completion timeline. Allow them to review internally and revert to you. Time & cost expectation must be clarified in the same discussion. Be careful and rehearse the points because Slightest miscommunication can change the course of the project. Trust your team and communicate regularly. Be the ideal project leader you always wanted to be and create cohesion within all stakeholders.

8.1 Create a budget contingency (optional)

No. 1 rule of project management is always plan for contingency. We must consider that not everything will go as planned and there could be some surprises in future. It is difficult to request additional funds when project is in downward spiral. Stakeholder may see the whole project differently. Yet the PM should add at least 10% contingency fund, while requesting additional budget. Do anticipate challenges in execution phase which may increase the cost. Keep in mind that unplanned issue can impact project timeline and change course.


Always believe that the outgoing PM would not leave if everything were going to plan. Expect problems and be quick to identify. If you find out project financials are in red, then use any & all techniques from the list. Start with notifying the immediate manager. Followed by a sold presentation of the project status & financial state. It is important to create waves as early as possible. Collaborate with your team & partners to resolve the situation. Use effective layered communication throughout the project. Be smart to understand the situation & politics, sometimes there are unlisted reasons to run loss making project. Give your best efforts to revive the project and complete.

Additional reading

Description URL
7 effective tips on how to deal with project cost overruns. https://www.bauwise.com/7-effective-tips-on-how-to-deal-with-project-cost-overruns/
Six Techniques to get an over budget project back on track https://www.techrepublic.com/article/apply-these-six-techniques-to-get-an-over-budget-project-back-on-track/

Share It..


You may also like