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Contingency Approach 4/6 - Budget

01.Contingency Approach - Intro
02.Contingency Approach - Plan
03.Contingency Approach - Time
04.Contingency Approach - Budget
05.Contingency Approach - Resources
06.Contingency Approach - Scope

Devising a contingency approach to the project budget is a fairly easy thing to do. After all getting the maximum budget allocated to the project is something which every project manager should instinctively look to achieve.

The problem, as in all things, is getting others to accept the budget you want, but without them realising the contingency you have hidden within it. After all no Organisation willingly allocates budgets based on 25% contingency. Most in fact don't bother to allocate any contingency at all because they simply can't afford it.

In one project I was managing I needed an actual budget of $8.8m to deliver the project. This had absolutely no contingency within it. The Finance department, rather arbitarily decided the project could be delivered for $3.5m without providing any explanation for how this could be managed. And in these Credit Crunch times this is something which is only going to increase.

However I digress. The key to creating contingency in your budget is subterfuge. Basically you need to ensure that your superiors and Finance think they are getting a good deal and have driven a hard bargain with all your workstreams. Now this is a hard thing to achieve. Certainly you can push them a certain amount, but push them too hard and they wil resent you and then not actually deliver what you require.

So the key is to know how to manage expectations. Now this is such a critical element of successful project management that it will be dealt with in a separate section. However for the purposes of this section, this might work as in the following example:

Example: Contingency Approach - Budget

I asked a workstream for an effort estimate. This workstream was renowned for always giving high estimates which might have been realistic the problem being that noone understood what this workstream actually did other than it seemed extremely easy to do.

I was given an estimate of 170 man days of effort. By using my previous experience I reckoned this should be nearer to 20-30 man days. So I mentioned the original estimate to my boss together with telling him it was insane and I would get it down. I pushed the workstream and they provided an updated quote of 120 days. My boss was thrilled and reckoned I was a fantastic at getting realistic quotes. When he work was actually done it came to just 35 days; ie much closer to what I had anticipated.

I was therefore able to use the 135 days additional effort in the budget as contingency to allow other workstreams to have additional resource if required. Even better I applied this same technique to a number of workstreams and fairly soon had garnered a reputation for being able to be a tough task master where estimates were concerned. I was even asked to check over other projects estimates and provide them with guidance on how to get them reduced.

Contingency Approach 4/6 - Tip

This is what I mean about creating contingency int he budget. It's all about managing expectations and having a clear idea of what effort you think the work should take. Yes this does take experience but if you are a fast learner you should be able to apply at least some of these techniques to your project.

Remember no project can have too big a budget. Therefore every cent you manage to increase your project budget by, will only help you further in the project lifecycle.

01.Contingency Approach - Intro
02.Contingency Approach - Plan
03.Contingency Approach - Time
04.Contingency Approach - Budget
05.Contingency Approach - Resources
06.Contingency Approach - Scope

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