What Kinds of Projects Rarely Go Over Budget

Projects that are well conceived and managed typically stay on budget and on schedule. This is a straightforward truth. Today's projects, however, need to align with modern market dynamics, necessitating methodologies that can harness today's environment to ensure success on all fronts. Integrated Project Delivery (IPD) is one such methodology that provides the best opportunity for a project to succeed financially, meet timelines, and optimize occupancy.

Truisms in Project Management

Through my experience with various projects, I have observed some consistent patterns:

Projects often take twice as long and cost twice as much, delivering only half the expected returns. Poor planning can cause a project to blow out by a factor of three, whereas good planning can limit it to a factor of two.

While these outcomes may seem disheartening, you are not alone. Many have experienced the same fate. The reasons behind a construction budget underpredicting actual expenses are manifold, including:

Lack of complete knowledge about all project elements, including current costs and availabilities. Optimistic forecasts of time and resources needed to complete the project. No contingency built into the budget to cover unforeseeable events. Unexpected changes to the project in construction, not accounted for in the budget. Building a budget on unrealistic top-down directives, such as completing by a certain date or within a certain budget, even if the project is urgent and funds are limited.

Rarely Budget Overruns: Key Elements

From these observations, it becomes clear that projects that rarely go over budget share several common traits:

Thorough Research: Comprehensive knowledge of all project elements, including costs and availability. Pessimistic Approach: Anticipating potential problems with realistic expectations. Substantial Contingencies: Allocating at least 30% of the budget to unforeseen events. Flexibility: Not allowing project changes without upgrading the budget. Bottom-Up Budgeting: Building the budget from the ground up, rather than squeezing it into arbitrary top-down constraints.

While common in large, established corporations and governments, such meticulous budgeting is often rare in fast-evolving, resource-scarce entrepreneurial firms. However, adopting Integrated Project Delivery (IPD) provides a structured framework to achieve these goals and ensure project success.

Conclusion

By following these best practices and leveraging methodologies like IPD, project managers can significantly reduce the chances of budget overruns. Whether in construction, technology, or any other sector, thorough planning, realistic contingencies, and flexible management are the keys to project success.