VIDEO: Cost Overrun | Definition & Strategies to Avoid

foreign project managers I'm Mackenzie and I want to talk about cost overruns at surface level they sound quite scary regardless of the root cause cost overruns can be lethal to a project if you don't take the necessary precautions so today I'm going to walk you through the basics of what a cost overrun is how they happen and how you can prevent them technically speaking a cost overrun AKA a cost increase or budget overrun occurs because of internal or external factors that ultimately increase the total project cost which exceeds the initial projections overruns can be extremely costly to organizations particularly in Industries like Tech and it according to the Harvard Business review on average over on projects exceed budget Plans by 27 moreover a whopping 55 of project managers site cost overrun as a main contributor to project failure making it one of the most lethal threats to project success and Longevity overall the last thing anyone wants to discuss as they approach a new project is the potential bumps in the road that may appear after all the start of a new project is an exciting time for Team if you're looking to avoid dealing with a cost overrun as your project takes flight then you'll need to recognize the potential issues early to spot the causes of cost overrun you'll first need to understand the three primary reasons the first is economic disruptions this can be anything from budget miscalculation supplier price manipulation or a sudden increase in cost due to larger economic factors price inflation and more the second is technical considerations these include inaccuracies in Project planning diversions from best practices and even delays in progress from outside sources the third and last cause is internal factors and there's a variety of them just to list a few there can be inner teen conflict scope creep lack of leadership inaccurate project cost estimates inefficient communication and decreased commitment levels if you're careful and act quickly you can sometimes avoid a majority of the negative impacts from these factors just make sure you stay vigilant to the early signs of detrimental effects now that you know what to avoid here is a list of do's and don'ts when it comes to cost overrun do create a detailed plan discuss contingency planning utilize project management software review past project outcomes and Define team roles and objectives early don't rush planning wait until the last minute fail to write down key aspects assume your project won't deviate from the main goal neglect project management tools avoid reviewing past projects or ignore early team assignments I know this sounds like a lot but it's vital you keep all of this in mind preventing cost overrun isn't a game of luck it comes from following a detailed process that targets the roots of an overrun before it ever has a chance to develop that's a wrap on cost overrun if you want to read up on it further then go check out this article not only does it provide an in-depth analysis of cost overrun but it also Details four ways you can mitigate damages but before you go be sure to click the like icon hit the Subscribe button and visit project dashmanagement.com for more PM Solutions thanks for watching

This transcript was generated automatically from the video's captions and may contain errors.