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Project Insight: The True Cost of Budget Overruns

As every project manager knows, meeting budget constraints is quite important. Unfortunately, it's not always a reality. Projects run over budget more often than most managers would like and it's not always their fault. Oftentimes, outside events cause expenses to spiral upwards and projects run over budget even after the proper project insight has been exhibited. Yet project managers do have significant control over their work and they can manipulate plenty of factors that determine whether a project stays on budget. 

Project Insight on Cost Planning 

Budget overruns can be avoided when project managers act in a proactive, cost conscious manner. While projects can always use more people, time and resources, managers must achieve the delicate balance between such costs and budget constraints. It is imperative to make use of project cost planning to keep things on track.

How To Prevent Cost Overruns

Cost overruns often occur when a project begins with an overly conservative budget. While under-financing projects at the outset is ambitious, it puts projects managers in a bind. When managers have too few resources to work with, their chances of spending more than the amount budgeted for the project increases. If managers aren't equipped with the proper financing, their projects will likely fail or severely underwhelm, no matter how much project insight they've provided. Managers should discuss financing with the project sponsor at the outset in order to prevent such cost overruns.


Project managers will testify that seemingly simple projects can become quite complex as they progress. As complexity intensifies, budget constraints are often breached. The solution to this problem can't be solved with merely project insight. It is not enough to simply plan out a budget at each project's start. Instead, break it down into phases and plan appropriately as each phase begins and ends.

Cost Estimates

Oftentimes, unreasonable costs estimates cause projects to cost more than the budgeted amount. Project sponsors and other finance specialists should use hard data from previous projects of a similar nature to attempt to predict how much an upcoming project will really cost. Unfortunately, one's “gut feeling” is often used to extrapolate a project's cost. It might help to disassemble each component of the project to better estimate how of much each part will cost on an individual basis. The use of multiple estimation techniques like bottom-up, parametric estimating and three-point estimates will also help.

Budget Buffers

One critical technique that project managers can employ is a budget buffer. Without a buffer, it'll be hard to sleep at night as you'll be worrying about any minor delay or tweak causing a budget overrun. So plan ahead as if unexpected events will happen. Institute a buffer on each project to account for variables like supplier issues, scope alterations, changes in the weather etc.


When project schedules aren't met, there's little chance that it'll stay on budget. Sticking to a timeline doesn't always guarantee that it'll stay within budget constraints but it certainly helps. Extensions can become quite costly as more overhead will be required over the additional time period. The solution is to pay particular attention to project responsibilities that are the most important. Doing so will keep the job on track and help avoid cost overruns. Be honest about finances if there's a request for an extension. Let your superiors and colleagues know how much you think it will cost so that no one is let down in the end.

Take Advantage Of High Tech Solutions

Project Mangers have found that software like InEight's Hard Dollar Estimating software helps plan project budgets and manage costs throughout project timelines. Hard Dollar Estimating can simplify the juggling act that project managers perform when overseeing multiple jobs at once. This software empowers managers to appropriately handle numerous project demands in a timely manner. It estimates costs at the outset of projects and throughout their duration.

Aside from forecasting costs, this software also provides real-time project status updates so managers can modify strategies to stay within budget constraints. It builds cost models and custom reports, estimates completion dates and keeps track of your team's progress. The software can even be thoroughly integrated into your office's technology so you can view pertinent data on any device.


The acceptance of budget overruns alone isn't enough. While everyone will admit that budget forecasts are often merely the representations of wishful thinking, constant overruns are problematic and they can reflect poorly on project managers.

Key Points

  • Every project needs a buffer to accommodate for inevitable deviations and surprises that have the potential to increase costs.

  • Segment each project into pieces and budget for each component as the project progresses.

By utilizing Utilize Hard Dollar construction estimating software and project control software to manage estimates, increase accuracy and enable real-time cost management, you will be able to avoid cost overruns with ease. To learn more about this software solution, view it in our store or feel free to contact one of the experts at IMS.


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