7 Tips for Preventing Cost Overrun on Projects


When managing a project there is always the triple constraint hanging over the project manager’s head like the Sword of Damocles. There’s more than just scope, schedule and cost that can go afoul in a project, but if they do, it’s a major concern.

While all those constraints are important, let’s just focus on one for now: cost. Avoiding budget overrun is key to closing a successful project. Quality and keeping to a schedule can all go out the window if the project is delivered over budget.

Of course, it’s easy to say you’re going to keep a tight budget, but cost overruns can happen in so many places, so actually keeping costs down can sometimes feel like a game of whack-a-mole.

ProjectManager's dashboard
Track project costs in real time with ProjectManager’s dashboards. Learn more!

What Is Cost Overrun?

Cost overrun is not cost escalation; that term is used to describe an anticipated increase in a budgeted cost, say due to inflation. A cost overrun is a bit different.

Cost overrun is also known as a cost increase or budget overrun. It’s an unexpected cost, due to an underestimation during the budgeting process or another reason. There are three types of cost overrun:

  • Technical – This is due to bad estimates, or not enough data being collected when formulating the budget.
  • Psychological – These overruns cause optimism bias, escalation of commitment, and scope creep.
  • Political-economic – This is due to strategic misrepresentation of scope and budget.

Definitions of cost overrun include:

  • A percentage of the total expenditure
  • A total percentage including and above the original budget, or,
  • A percentage of the cost overruns to the original budget

How to Avoid Cost Overrun

Cost overrun, or any sort of expense that pushes a project past the agreed-upon budget is something of which a project manager must be constantly vigilant. There are several ways one can prevent cost overrun.

Here are seven that help keeps a reign on your budget:

1. Thorough Project Planning

The best way to stop cost overrun is to plan against it before executing a project. The more thorough and accurate your estimates, the more likely you’ll stay within budget. There are risks, but those can be accounted for with an exhaustive risk management plan. When planning for any project, you must consider all possible scenarios, using historic data, interviews and experience. Once that plan has been detailed, have it signed off by the stakeholders of the project, so everyone is on the same page in terms of expectations.

2. Know Your Vendors

Many projects are going to contract with outside vendors, whether to do specific tasks or supply materials and equipment. A relationship with any outside vendor opens your project up to cost overruns that are often beyond your control. Therefore, it’s critical to do due diligence before relationships are cemented. First, understand the capacity of the vendor, and if they’re going to meet your needs. When the vendor quotes a cost, make sure it’s accurate. Then, before signing the contract, do a bit of background-checking to see if the vendor meets deadlines, and what others have to say about working with them.

3. Keep to Planned Scope

Scope creep is one of the biggest threats to sending a project into cost overrun. Change requests always bog down the desks of project managers. These come from stakeholders or clients, but also from team members. They all have wants and needs. Many of them may be appropriate and even beneficial to the project. However, too many changes can drastically impact the project, making cost overruns unavoidable. Think long and hard about the big picture before you increase project scope.

4. Use a Project Planning Tool

It’s a given a good tool is going to make a project manager’s work easier, add to the productivity of the project, and increase efficiencies. It will also assist in keeping cost overruns at a minimum. A scheduling tool like a Gantt chart is going to help keep the project on track and prevent cost override.

5. Keep Stakeholders Updated

If there isn’t a clear line of communication between stakeholders and project managers, delays are inevitable. Delays lead to cost overruns. There is too great a risk work will start on the wrong thing at the wrong time. This wasted time threatens to send the whole project off track. Stakeholders, as well as teams, need proper communications, but each should get the right information. Teams want details, and stakeholders want broad strokes, to make sure the project is progressing as planned.

6. Monitor Progress

The real-time dashboard from ProjectManager is also ideal for tracking the progress of a project as it happens, not after the fact. Before issues become problems that threaten to take the project off-track and over budget they can be resolved. The real-time dashboard measures not only the project’s progress, but the team’s workload, timelines for planned and actual completion, including project slippage, and much more.

7. Reassign Resources

You’re going to respond by reallocating resources if you discover a project spending more than budgeted. But you can also prepare for that scenario by evaluating resources beforehand, and placing them where they’ll be most effective. This is especially true with your most valuable resource: your team. By assembling the most experienced and skilled team members you can have a more productive and efficient project. These resources might cost more, but if you’ve done your planning and set aside funds you’ll save money on the backend when there are fewer issues to handle.

ProjectManager is the Perfect Tool to Keep Your Costs in Line

ProjectManager is a cloud-based software with all the tools needed for keeping your costs in a line across all the phases of your project.

Online Gantt Charts Keep Projects on Track

ProjectManager, being a cloud-based software, has an easy-to-use online Gantt chart. It fosters collaboration and updates status instantly, so the project manager and team are up-to-date on project progress. Proper scheduling helps keep estimates accurate. This prevents idle time which leads to risk of cost overrun.

ProjectManager's Gantt chart

Task dependencies are linkable within ProjectManager’s Gantt chart. While others complete their work, these dependencies prevent team members from being blocked or left waiting with nothing to do. Each task can have files attached, whether docs or images. Also, team members can comment at the task level for a more collaborative and efficient execution.

Real-Time Dashboards From ProjectManager Update Instantly

ProjectManager has a real-time dashboard that makes reporting to stakeholders quick and easy. The real-time dashboard instantly shows status updates. These numbers are then crunched and displayed in a series of graphs and charts that reflect the project’s many metrics. Project managers can then filter these graphs and charts to show the data they need. Printing out these graphs and charts is an option if you want a hard copy nearby. When presenting to the stakeholders, however, bring your computer. Why? If asked for more detail on a project, you can answer with a few simple clicks in our software.

ProjectManager's dashboard with closeup of cost metric

ProjectManager is a cloud-based project management software that gives project managers the tools they need to plan, track and report. Cost overrun is more controlled and less likely to sneak up and sink a project because of our dynamic and collaborative software, including visual workflow Kanban boards and interactive Gantt charts. Try it today with our free 30-day trial.

Related Posts

Deliver your projects
on time and under budget

Start planning your projects.

Start free trial