Budget Creep

Why Budget Creep Occurs and How to Prevent It

Why Budget Creep Occurs And How To Prevent It

As a project manager, you do everything in your power to make sure each project stays on schedule and budget. Things go well most of the time. And yet, you increasingly find yourself worrying about budget creep. The last few projects have ended up costing more than anticipated. Why? More importantly, how can you put a stop to it?

Budget creep is nothing new. Since the dawn of project management, cost overruns have been part of the game. Unfortunately, requesting yet another budget analysis is not the solution. Preventing budget creep requires understanding why it happens. You have to be proactive rather than reactive. Otherwise, budget creep just, well, creeps up on you.

Budget Creep’s Main Drivers

For the record, budget creep occurs as project coordinators gradually spend money faster than anticipated. It doesn’t take much. A few thousand dollars here and there adds up over the life of a project, forcing it way over budget when all is said and done.

It has been our experience that there are two main drivers behind budget creep:

1. Poorly Defined Deliverables

A project’s deliverables are the measuring stick for its budget. As you pay for them, the remaining money in the budget is gradually depleted. As such, you can actually drive budget creep forward by accepting poorly defined deliverables.

A poorly defined deliverable is one that proves hard to quantify. And if you cannot quantify it, how can you know how much to pay for it? The end result is a tendency to spend more money than necessary – just to be on the safe side.

2. Not Controlling Scope Creep

Budget creep’s other main driving force is scope creep. You could make the case that this particular problem is more troublesome than poorly defined deliverables. Our experience suggests that scope creep occurs on nearly every project.

People have a tendency to come up with new ideas as they work through tasks. In project management, new ideas are introduced as things move along. Sometimes, new directions are considered. It all leads to scope creep, which drives budget creep.

Clearly Define Deliverables

Understanding what drives budget creep makes developing strategies to avoid it fairly easy. For starters, clearly define your deliverables. Whether you are looking at deliverables from your vendors or analyzing your deliverables as a vendor, basic information is not enough. You need details. A well-defined deliverable articulates:

  • Deadlines (start and end dates)
  • All associated tasks
  • All resources and assets
  • Individual task deadlines
  • Names of those assigned to each task
  • Ongoing task status
  • Time constraints for each task.

This list of details is by no means conclusive. The list also changes from one project to the next. Here’s the point: the more details you have for your deliverables, the more well defined they are. Details are the key to preventing deliverables from driving budget creep.

Address Scope Creep Immediately

As far as scope creep is concerned, the only way to keep it from driving budget creep is to address it immediately. Designate a point person – or two or three if necessary – capable of spotting scope creep as it develops. The goal here is to put the lid on any new ideas or directions that, if implemented, would expand the scope of the project.

Unfortunately, containing scope creep often means someone acting as the bad guy. It is a thankless job for sure. But in the aftermath, it will prove its worth. Keeping projects contained to their original scope keeps them within their budgets and helps everyone involved stay focused. There is nothing wrong with that.