The budget is commonly one of the biggest challenges for any engineering project manager.
Staying on track, even in the face of unexpected complications, is notoriously difficult. This is why when project managers are hired, so much importance is placed on financial management skills during the engineering recruitment process.
Even if your last few projects have stayed on budget, it’s always good to keep working on your money management skills as a project manager.
Below are our top tips to bear in mind:
1. HAVE MULTIPLE CONTINGENCY PLANS
Budget management during engineering projects is all about planning for the worst. It’d be naïve to assume that everything will go swimmingly, and cost exactly what you’d expect it to cost. This is why you need to build in a contingency, but not just one.
Project managers would be wise to create individually tailored budgets for a range of scenarios. For example:
- The cost of materials suddenly increases
- Staff shortages delay the project timeline
- The parameters of the project change – potentially due to decisions made by the client
- Designs need to be reworked to accommodate an unexpected technical complication.
Having a contingency plan for every possible scenario takes the unknown out of the equation. It also helps to manage the client’s expectations and speed up decision-making along the way. So, if something about the project changes at any point, it won’t be a major shock to the budget or the timeline.
2. COMMUNICATE THE BUDGET TO THE ENGINEERING TEAM ON THE GROUND
It can be useful for the engineers on the ground to be aware of any budget restrictions or particular spending priorities before starting work.
This means they can be aware of their own costs, and can factor the budget into decision-making throughout the project. For example, when choosing between specifications for materials, or making on-the-spot decisions if a design needs to be adapted.
In fact, you may even want to look for people with budget management experience during the engineering recruitment process for the project.
3. CHOOSE THE RIGHT METRICS TO MONITOR REAL-TIME COST AND PERFORMANCE
You’ve developed a realistic budget for the project, but how is it working out in real terms? Project managers need to develop KPIs and accurate systems for monitoring and measuring spending throughout the project.
Examples of the key KPIs you could track include:
- Actual cost (project expenditures)
- Planned value (estimated costs of planned activities)
- Earned value (budget for activities completed).
Together, these carefully selected metrics will help you measure performance, including from the viewpoints of all stakeholders.
If you’re drifting off track, you need to spot it early and make the necessary adjustments before an overrun starts to snowball.
4. SCHEDULE IN A MID-PROJECT REVIEW
This is a particularly useful thing to do during major or long-running projects. Schedule in a mid-point review (or earlier in the project timeline, if needed) of all the major elements of the project including cost.
It’s at this point you may need to make crucial decisions. If the project is running behind, it could be worth allocating resources to engineering recruitment to get more people on board. This could save money in the long run, as it’ll bring the project in on time and avoid expensive delays.
5. KEEP STAKEHOLDERS IN THE LOOP
It’s tempting to stay quiet in the face of budget overruns or unexpected costs, until you’re able to get spending back on track. But it’s far better to communicate any issues early, to reassure stakeholders, explain how it affects the project outcome and lay out the plan for bringing the budget back into line.
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