How to Reduce Your Project Costs

You’ve diligently entered costs into your project plan and either looked at the resulting cost totals…or compared your planned costs against your budget… If your costs are coming out to $110,000 when your maximum is $95,000, you have to figure out how to trim $15,000 from your planned project costs or heads will roll — most likely yours. How does one go about cutting thousands of dollars from a project? Answer: very carefully.

First, look at your cost assumptions to make sure mistakes haven’t sent project costs into the stratosphere. Ideally, you correct the misplaced zero you find and everything becomes hunky-dory. The next line of defense is to reschedule tasks to reduce costs. You can also reexamine resource assignments to look for ways to cut costs.

This [article] discusses each of these cost-cutting techniques. However, if these methods aren’t enough to solve your budget crisis, it’s time to take a hard look at the budget itself and propose a change to the project budget, scope, or schedule.

Checking for Cost Errors

When your TV suddenly doesn’t turn on, or you can’t get the channel that’s showing world championship shark baiting, you probably don’t schedule a technician service call right away. You poke around, hit buttons on the remote, turn things off and on, and see if the picture comes back. If you’re really thinking straight, the very first thing you check is whether your dog unplugged the TV or cables again.

The same troubleshooting principle applies when planned project costs don’t jibe with your project budget. Don’t assume that the project is really $15,000 over budget just yet. Look for errors, starting with the simple, most obvious things first. In this [article] you learn how to systematically scan your project plan for mistakes in cost values or calculations.

Here are cost-related items to check, and where to look for them:

• Cost per use. In the Resource Sheet, look for values in the Cost Per Use column. Remember that a cost per use is levied for each task that a resource is assigned to. For example, suppose a crane costs $5,000 to get it on site. If you apply the $5,000 as cost per use, and then assign the crane to six tasks, your project cost includes $30,000 for crane setup instead of only $5,000. If a resource has a standard rate combined with a cost per use, make sure they’re both legitimate. For instance, a dumpster may cost $5 a day to have on site as well as a $450 charge each time you empty it.
• Resource rates. Also in the Resource Sheet, review the rates you’ve assigned to human resources and equipment resources. Review the material resource rates as well.

If you have a lot of resources, consider sorting by Std. Rate so that excessively high or low rates stand out. (For example, if a janitor comes out higher than your information architect, someone’s standard rate is off. Or, if you’ve replaced a senior person with a lower-level employee, make sure you’ve adjusted the standard rate accordingly.) Choose Project | Sort | Sort by, and then, in the “Sort by” box, choose Standard Rate. Make sure that the Descending option is selected. To return the view to its normal order, choose Project | Sort | “by ID”.

• Planned assignment costs. Apply the Cost table to the Resource Sheet, and then check your resources’ costs on their assignments. The Cost field shows the total planned cost for a resource for all tasks it’s assigned to. To see the resources that run the tab up the most, sort the view by the Cost field (Project | Sort | “by Cost”). Then you can focus on ways to reduce the costs for those resources.
• Cost resource amounts. To easily review cost resource amounts, display the Resource Usage view, apply the Cost table, and then group the view by resource type (Project | Group by | Resource Type). Scroll down to the Type: Cost grouping, and the result looks similar to Figure 11-17. To return the view to its normal ungrouped arrangement, choose Project | Group by | No Group.
• Fixed Costs for tasks. In the Gantt Chart view, check any fixed costs for tasks to see if they have one or two zeroes too many. Apply the Cost table to the view, and then sort by the Fixed Cost field. (Choose Project | Sort | Sort by, and then, in the “Sort by” box, choose Fixed Cost. Select the Descending option to show the highest fixed costs at the top of the view.) Make sure you’re not duplicating a fixed cost and a cost resource on the same task.
• Task durations. Review task durations for any that approach the length of geologic eras. Durations affect cost because Project multiplies duration by rates to calculate cost.

After you’ve thoroughly reviewed cost resource cost assumptions as well as task information that affects cost, be sure to take a closer look at the budget itself. Rather than being carved into stone by lightning bolts from on high, the budget is prepared by a human being like you. Check the assumptions in the budget, and make sure someone hasn’t made any outlandish mistakes there.

Adjusting the Schedule

If your planned costs and the budget still don’t see eye-to-eye after you’ve corrected cost mistakes, it’s time for Plan B: adjusting the schedule. Here are some ways you can adjust the schedule to reduce costs:

• Task durations, part deux. You scrutinized task durations in the previous section looking for possible errors. Now, see if there’s any way to realistically shorten durations and still get the job done…

In the Gantt Chart view, make sure the Entry table is visible. You can run down the tasks in order, or sort the schedule by duration to cherry-pick the longest durations for your scrutiny. Choose Project | Sort | Sort by, and then, in the “Sort by” box, choose Duration. Select the Descending option to show the longest durations at the top of the view. Turn off the “Keep outline structure” checkbox, and then click Sort.

• Task relationships. Sometimes, by linking tasks more aggressively…you can shorten the time you have to pay resources to stand around waiting to begin their next task. To most easily review task relationships, in a Gantt Chart view, look at the Gantt bars.
• Date constraints. Any constraints other than As Soon As Possible (or As Late As Possible for a project scheduled from that finish date) are worth a second look. If you have a task with a Must Finish On or Start No Earlier Than date constraint applied, resources may be waiting in limbo unnecessarily for the right time to work on tasks. Removing that limbo time can help you cut costs. Add the Constraint Type and Constraint Date fields to a table, and then sort or group by Constraint Type.

Adjusting Assignments

If you’ve adjusted the schedule to optimize your costs, but you still have more belt-tightening to do, try adjusting resource assignments. Here are a few strategies to try:

• Replace expensive resources with cheaper ones. Consider having your more experienced (and probably more expensive) resources mentor your cheaper resources for a short time on tasks, rather than working the entire task. Or, use cheaper in-house — perhaps borrowed — resources, rather than more expensive outside consultants. On the other hand, sometimes hiring temporary contract labor is cheaper than using your in-house employees.
• Do away with overtime. If your current schedule involves overtime, see if you can adjust assignments to eliminate overtime (on resources that cost more for overtime, of course).

Rethinking Your Project Budget

If your best efforts on project costs still don’t match the project budget, then it’s time for renegotiation. You’ve checked and rechecked that your costs reflect the project reality — as you know it so far. The next step is talking to the customer, the project sponsor, or whichever head honcho holds the purse-strings. There are two choices in this situation.

• Get a bigger budget. The first option you may consider is trying to get some money appropriated for the project. Usually, this option is also the most difficult.
• Cut back on project scope or quality. Cutting the number of tasks, for example, a particular phase, or reducing the quality objectives can cut costs — but only if all the stakeholders agree.

Excerpted from Microsoft Project 2007: The Missing Manual by Bonnie Biafore. ISBN 0-596-52836-1. Copyright © 2007 O’Reilly Media, Inc.  All rights reserved.  Used with permission.