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3 Reasons why cost overruns occur

3 Reasons why cost overruns occur

Average reading time 5 minutes

3 Reasons why cost overruns occur

<3 Reasons why cost overruns occur>

Project managers handle different aspects of a project from ensuring the project is within scope to managing the cost of the project. An important aspect of managing a project is cost. According to a report by Standish Group, 71 percent of projects experienced a cost overrun. Hence, project cost is a key aspect for project managers to look into. Project managers need to ensure that the project cost incurred is within the project budget. When project costs exceed the project budget, it is known as cost overrun. Let’s explore 3 common reasons why cost overruns occur.  

3 reasons why cost overruns occur

  1. Unrealistic cost estimates
  2. Scope Creep
  3. Lack of experience
Unrealistic cost estimates

Unrealistic cost estimates occur when the project budget is formulated based on bad estimates. This happens when the parties formulating the budget do not collect enough data to base their budget on. To make a realistic budget, it is advisable to base project budgets based on similar past projects. In addition to referencing similar projects from the past, care should be taken to consider all aspects of the project and any new components and budget for each one of them accordingly.

Scope Creep

Scope creep refers to changes, continuous or uncontrolled growth in a project’s scope. In the beginning, the scope of the project may not be clearly defined as the parties involved in the project may not be very sure of how the project is going to take shape. Hence, in the beginning, the project scope may be limited.

If the project manager plans the budget based on the limited project scope, when the project scope enlarges as the project takes shape, it would be difficult for them to control the costs associated with the enlarged scope of the project. Nearly 50% of projects experience scope creep and only 57% of projects finish within the budget. Hence, to tackle this common problem, project managers should discuss with the parties of the project and discuss possible changes to the scoop and account for them in the budget.

Lack of experience

Lack of experience may cause a project manager to grossly underestimate the project budget. It is no doubt that novice project managers may be good at bringing in fresh and new perspectives to the budgeting process. However, it takes an experienced project manager to be able to visualize the possible components of the project that may incur a higher cost than anticipated.

The Project Management Institute also reaffirms this as it reports that Senior executives are often far more aware of the value of project management than junior as 87% of senior executives fully understand the project management processes.

To equip you with the necessary skills to confidently manage the costs of a project, a project management training course that focuses on costs and budgets will help to enhance your project management skills. You would be able to better control the costs of a project and would be able to distinguish yourself as a competent and well-rounded project manager.

Blog - 5 Tips for Successfully Managing Project Costs

<Blog – 5 Tips for Successfully Managing Project Costs>

Managing Project Costs and Budget is a 3-day training course which would be held from 23 – 25 September 2020 at Kuala Lumpur. This course will provide delegates with an effective set of skills and knowledge that will allow them to manage the dynamic project cost function. Through these skills and new knowledge, the delegate will acquire the ability to implement the application of techniques that will contribute directly to more efficient project financial management processes.

The course focuses on techniques as the Work Breakdown Structure (WBS); the Work Package and the Cost Breakdown Structure (CBS). Topics such as cost estimations, cost escalations and cost reductions would also be explored. At the end of the course, delegates will be proficient with the integration of cost scheduling into project management processes and procedures and be able to apply the basics of managing a project budget.

For more information please email at

Managing Project Costs and Budget 23-25 Sept 2020 KL

<Managing Project Costs and Budget 23-25 Sept 2020 KL>

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