Be Proactive Managing a Project with Unrealistic Budget

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If you are a project manager dealing with what you perceive to be an unrealistic budget, the first thing you will want to do is discuss this with your sponsor to see if there are any factors that are driving the project budget. For instance, there may be budgetary restrictions. If you are a vendor, it is possible your sales people committed to a fixed price for the project. In some cases your manager or sponsor might set an arbitrary budget without much justification. It does not necessarily make your challenge any easier, but you may find that by better understanding the reason for the fixed budget, you may have an easier time getting yourself and your team members motivated to achieve it. When you have a full project management methodology you will have tools and techniques to respond to these concerns.  There are a number of responses to a project with unrealistic budgets.

• Reduce scope. Talk to your sponsor about reducing the project scope. See if there are features and functionality that he can live without for now so that you can deliver the project within the budget specified.
• Identify and manage the budget as a project risk. Utilizing risk management will help better manage expectations early in the project and also be a way to gather input and ideas for ways that you might be able to hit the budget.
• Manage scope with zero tolerance. On many projects, you start with an aggressive budget and the situation gets worse because the project manager does not effectively manage scope. If you are on a project with an unrealistic budget to begin with, it is absolutely critical that you manage scope effectively and do not increase scope without an approved scope change request. Disciplined scope management will ensure that you only have to deliver what was originally promised, and that any approved changes are accompanied by a corresponding increase in budget and timeline.
• Look for process improvement opportunities. Lastly, take an honest look at your budget and your approach for executing the project. Talk to your team, clients, and manager about any ideas they may have for executing the project at a cheaper cost. This will get everyone thinking about being part of a solution. For instance, perhaps you could buy used equipment that will still meet your needs instead of new equipment. Perhaps you can change the process for gathering requirements so that they are competed earlier. This may result in budget savings as well.

Although it appears that you are being held accountable for budgets that are not within your control, you do have control over the processes you use to manage the project. Look at all aspects of project management to see if the unrealistic budget can be achieved.