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www.SimpleP3M.co.uk
How to simply estimate
the costs of poor project
delivery
By
Adrian Shaw (P3M Consultant)
Introduction
If your organisation is not good at delivering projects on-time, within
budget and to quality expectations, i...
Business Case
The cost of poor project delivery can then provide the basis of
a Business Case for implementing a framework...
Source data
To simply (gu)estimate the costs of projects going over-budget
and over-running the following small amount of ...
Calculations
The total annual project budget is easily calculated as:
TPB = TNP x APB (£)
The total cost of projects over-...
Important Point!
The total cost of projects over-running (TPDO) should result in a deficit
compared with the corresponding...
Illustration of TPCO and TPDO masking
www.SimpleP3M.co.uk
Conclusion
The total project lost value TPLV = TPDO + TPCO, whereas the
variance against total project budget is TPBV = TP...
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SimpleP3M cost calculator

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SimpleP3M cost calculator

  1. 1. www.SimpleP3M.co.uk How to simply estimate the costs of poor project delivery By Adrian Shaw (P3M Consultant)
  2. 2. Introduction If your organisation is not good at delivering projects on-time, within budget and to quality expectations, it is well worth doing something to count the costs as the results can be surprisingly high. If you are not yet reliably delivering projects then it is very likely that you do not have a fit-for-purpose standard corporate project management framework in place, in which case you are probably not measuring project performance. This means you will not have data to refer to; nevertheless it is still worth (gu)estimating some high level figures that will serve to give you valuable indicative ballpark information. www.SimpleP3M.co.uk
  3. 3. Business Case The cost of poor project delivery can then provide the basis of a Business Case for implementing a framework that will greatly improve project delivery performance. Such a Business Case should include estimates for reduced project costs, project delivery efficiency improvements and any operational benefits (or start of production benefits) that would result from timely project completions. www.SimpleP3M.co.uk
  4. 4. Source data To simply (gu)estimate the costs of projects going over-budget and over-running the following small amount of data is required: Total number of projects in flight during the financial year, TNP Average project budget within the financial year (£), APB Average project duration over-run (weeks), APDO Average project cost over-budget (%), APCO Example: TNP = 100 APB = £10,000 APDO = 8 weeks APCO = 15% www.SimpleP3M.co.uk
  5. 5. Calculations The total annual project budget is easily calculated as: TPB = TNP x APB (£) The total cost of projects over-running is therefore: TPDO = (APDO / 52) x TPB (£), and The total cost of projects going over-budget is therefore: TPCO = (APCO / 100) x TPB (£) Example: TPB = 100 x £10,000 = £1,000,000 TPDO = (8/52) x £1,000,000 = £153,846 TPCO = (15/100) x £1,000,000 = £150,000 www.SimpleP3M.co.uk
  6. 6. Important Point! The total cost of projects over-running (TPDO) should result in a deficit compared with the corresponding financial year budget. However, this is masked by the total cost of projects going over-budget (TPCO) within the financial year, often resulting in something close to budget being spent! So, an organisation can be fooled into thinking that it has got good control of its projects and their costs when, in reality, the project over- run costs (TPDO) must now be budgeted within the following financial year, which would have been unnecessary if the projects had been delivered on time. The organisation has, in fact, not achieved the expected value of its projects within the financial year and the masking effect is hiding a double whammy! www.SimpleP3M.co.uk
  7. 7. Illustration of TPCO and TPDO masking www.SimpleP3M.co.uk
  8. 8. Conclusion The total project lost value TPLV = TPDO + TPCO, whereas the variance against total project budget is TPBV = TPDO – TPCO. Example: TPLV = £153,846 + £150,000 = £303,846 TPBV = £153,846 - £150,000 = £3,846 Do you recognise this effect within your organisation? (Some businesses rush around towards the end of the financial year trying to spend the budget surplus caused by a positive variance TPBV!). If so, do you agree that this is a terrible waste of money? Are you surprised how big the numbers are? I would be interested to hear of your findings and thoughts at Adrian@SimpleP3M.co.uk. www.SimpleP3M.co.uk

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