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WHAT IS PROJECT OVERRUN AND WHAT ARE THE REASONS FOR IT?

Updated: Oct 4, 2023

When it comes to project planning, the real currency of success is accuracy.


Around 28% of projects fail because of inaccurate cost estimates, so it’s clear that any project plan deserves the proper time, attention, and lots and lots of planning. Imprecise forecasts across costs, benefits and estimated durations can bring about project risks that can drastically impact your SaaS organization’s opportunities for growth and profitability.


Let’s dive deeper into project overrun, the signs to look out for, and what commonly causes it.


Ready to learn more? In this blog we’ll look at:


WHAT IS PROJECT OVERRUN?


Project overrun, sometimes referred to as cost overrun, is an event that occurs when a project’s actual costs exceeds the original budget. This leads to a deficit in the financial needs of the project and can slow or stop the project entirely. Project overrun is a common occurrence in the SaaS industry and project management teams aim to address it with extensive planning and research.


Although we will expand on this later, each cause of project overrun can be grouped into one of three categories:

  • Economic factors - caused by inaccuracies in the project budget or scope

  • Technical factors - incorrect estimates or mistakes in gathering data

  • Psychological factors - caused by scope creep or project commitment levels plummeting


WHAT ARE THE SIGNS OF PROJECT OVERRUN?


SaaS teams need to ensure that they have a clear view of a project’s progress from start to finish to be able to catch any signs of project overrun. We’ve listed some of the ways you can spot possible project overrun quickly:

  • A poor project budget outline, or not one at all

  • No effective contingency plan in place, causing spiraling unexpected costs

  • Lack of proper tools to track project spending

  • No efforts to review similar projects and historical data

  • No coherent resource utilization plan

  • Failure to document project deliverables, resulting in scope creep


WHAT CAUSES PROJECT OVERRUN?


Project overrun has become all too familiar in many industries. According to KPMG, only 31% of all projects came within 10% of the budget in the past three years. In most cases, it is caused by inaccurate analysis or planning before the project even starts. To help you know what to look out for, we’ve highlighted some of the most common reasons for project overrun below.


Inaccurate Project Estimates


While many of the stakeholders in a project are eager to get underway, if you have poor schedules or budgets from the very start, you won’t even be able to get your project off the ground. It can all start with mislaid expectations of the scope of work that the project contains. In some cases, projects will be estimated on a “one size fits all” basis, with chances of going beyond the original estimate high. If any of the parties responsible for the completion of a project seem unrealistic about timing or budget, this should be the first sign that the project is heading straight for an overrun.


Project Design Errors


Even if the right time and resources are allocated for an accurate budget, and accurate schedule estimates are made, poor design plans will always lead to project overruns in SaaS businesses. Being one of the first steps in a project, if the design is substandard, then it is extremely likely that everything else following it will be. Incomplete or incorrect plans almost guarantees poor work from the team carrying out the project, and can often slow down the progress of a project or stop it entirely, leading to scope creep and an increase in the cost of materials.


Admin Errors


Even with everything above done perfectly, you could still see overrun if administrators aren’t on the ball with the project’s progress. Even small errors between the admin team can lead to big problems. Poor communication between teams can lead to problems that could occur in one area of the project that may not even become known to other project managers until it's too late. The solution for many businesses is to just increase the size of the team, as with more people on the job, administrators can focus on their specific area of the project, right? This is not the best solution long-term however, as blindly increasing the number of workers could result in failures in collaboration that will do all but guarantee a project overrun.


Choosing the Wrong Team


Again, take everything up to this point as being done perfectly, if the team carrying out the project is not up to the job, overruns are still likely. Less experienced teams can cause costly errors and delays, even if they have the most polished plan to hand.


In every department exists individuals who possess their own unique skill set. If management teams do not take the time to recognize a team’s strengths and weaknesses, and just assign people to the job at will, they’re opening the door to massive risks with every project, and multiplying the chance for errors, and ultimately project overrun, by the second.


PRECURSIVE CAN HELP WITH THE PROJECT OVERRUN CALCULATOR


If you’ve experienced project overrun, or simply looking to avoid it in future projects, Precursive’s impressive project overrun calculator can show you how delayed implementations can affect the financial performance of your SaaS business.


The calculator can help you work out the impact on revenue and costs, giving you a better idea of the importance of delivering projects that are on time and within budget. Take a look today to begin planning your future projects and ensuring success.

Precursive's Project Overrun Calculator
Precursive's Project Overrun Calculator

 

WHAT NEXT?


Now you have a better idea of what can often be a barrier to completing a project on time and in budget, and you know the common causes of project overrun. Naturally the next step is learning how to overcome overrun and tackle it before it even becomes an issue. Luckily for you we can help you through this next step with our guide on how you can prevent overrun in your own projects.


To learn more about how Precursive PSA can help you manage projects effectively to avoid any chance of overrun, book a demo today!


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