The Cheapest Way to Run a Project Is with Enough Resources

Boston'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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Related articles

More articles on Project Management:

Nine Project Management Fallacies: I

Most of what we know about managing projects is useful and effective, but some of what we "know" just isn't so. Identifying the fallacies of project management reduces risk and enhances your ability to complete projects successfully.

When Change Is Hard: II

When organizational change is difficult, we sometimes blame poor leadership or "resistance." But even when we believe we have good leadership and the most cooperative populations, we can still encounter trouble. Why is change so hard so often?

Projects as Proxy Targets: I

Some projects have detractors so determined to prevent project success that there's very little they won't do to create conditions for failure. Here's Part I of a catalog of tactics they use.

Irrational Deadlines

Some deadlines are so unrealistic that from the outset we know we'll never meet them. Yet we keep setting (and accepting) irrational deadlines. Why does this happen?

How We Waste Time: II

We're all pretty good at wasting time. We're also fairly certain we know when we're doing it. But we're much better at it than we know. Here's Part II of a little catalog of time wasters, emphasizing those that are outside — or mostly outside — our awareness.

See also Project Management for more related articles.

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And on July 4: Interrupting Others in Meetings Safely: II

When we feel the need to interrupt someone who's speaking in a meeting, to offer a view or information, we would do well to consider (and mitigate) the risk of giving offense. Here are some techniques for interrupting the speaker in situations not addressed by the meeting's formal process. Available here and by RSS on July 4.

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