Question

Projects which are not well designed can run over cost and/or time, this is often defined as scope creep, which is the tendency for the project scope to expand over time- usually by changing requirements, specifications, and priorities (Laufer, p/105) it can happen due to many factors, including the cost of materials increasing from an original quote, labor taking more time than estimated, or an element being added that is considered an improvement or that was left out of the original plan.

Share with the class any experience you have had with a project failing to stay within time or cost estimates, describing what it was, how it occurred, the way it strayed from the original plan, and what you learned from the experience, if you don’t have a personal experience, share an example from research on recent projects.

Answer 1

I am sharing a personal experience. I was working with a renewable energy company that was recently awarded a project of designing and constructing a Solar Plant for a renowned client. The project cost, which was finalized with the client, had been prepared by the company's estimation team.

When the Project work started, the Project team started to realize that actual costs would be overshooting the approved Project cost. A thorough analysis was done, and it was found that the cost of many items in the estimate were not correct. For many items, the costs considered were much lower. The matter was forwarded to the Estimation team, which had prepared the Cost estimate. It was then known that the Cost Estimation team was given a very short notice period to prepare the estimate. The Team already had manpower crunch, and the supervisor was on personal leave during that period. One of the junior executives in the team had to prepare the estimate. He had limited experience and could somehow manage to complete the work. He had inadvertently used six-month-old item prices, and many of these prices had increased substantially in six months.

A fresh cost estimate was prepared, and it came out to be 20% higher than the original one. There was no way that the extra amount could be billed, as the Project cost was finalized with the client through a legal agreement. The project was completed without making any profit whatsoever. In fact, the company had to spend more than what it earned form the Project.

The learning from this experience is that any job should be done only by qualified personnel. In case, there is an urgency and required manpower is not available, alternate arrangements need to be made. A formal request could also have been sent to the client asking for some extra time for Project Cost estimation work. However, in no case, the work should have been finalized after getting done by a Junior executive. Some senior people should have been involved in the process to make sure that the estimates were accurate. The company realized that there a lapse in planning and co-ordination in the process. It was a very big learning for the company, and it was unanimously decided that comprehensive planning and co-ordination shall be done in the future to avoid such situations.