Why Projects Overrun and Where Cost Is Decided

Who this course is for

This course is for project managers, project controllers, cost engineers and finance partners who already know basic budgeting words and now need to apply them: build an estimate that holds, measure performance honestly, forecast the final cost, and act early. Each module builds on the one before. The examples come from construction, engineering, information technology and office projects, because the methods are the same in each.

Why projects overrun

Studies of large projects in many countries show that cost overruns are common and that they are not random. A few causes appear again and again:

• Optimism bias: people naturally expect things to go better than they usually do.
• Weak scope definition: the project is approved before anyone knows what it includes.
• Uncontrolled change: many small additions, none assessed together.
• Poor estimating data: no record of what similar work really cost.
• Pressure to win approval: a low number is presented because a realistic one might be rejected.

The cost influence curve

The ability to influence a project’s cost is highest at the start and falls quickly. In concept and design, a decision costs little to change but can save a lot. Once materials are ordered and work has started, the same change costs much more and saves less. By the time most money is being spent, most of the cost has already been decided. This is why cost management starts in the early stages, not when the first invoice arrives.