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Wednesday, 19 December 2018
 
 
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Project Management- Understanding the Timeline and Costs!  E-mail
Project Management Timeline and Costs

One thing I have seen over the years is the constant lack of understanding of the project timeline and its effect on the budget. Over and over again I have seen CEO's, COO's, CFO's, CIO's and an array of top level executives be penny wise and dollar stupid. They only focus on the number right in front of them and not the combined costs of the delay.

For an example I am going to use a situation that was taught to me by a close friend. This was about ten years ago and I was fairly new to the whole project management thing and this really turned on the light bulb above my head, I hope it does the same for you. Let's say you are the project manager that is in charge of building a bridge. Your daily operating costs are in the area of $14 million. You have 250 workers, cranes, barges, tugboats and countless other equipment. Nearing the half way point one of your foreman informs you that they are missing a vital part. This part connects one piece of the bridge to another and without it they cannot progress any further. The cost of this part is $16,000 but the supplier is on the opposite coast. The supplier says that they can overnight it to you at a cost of $1 million. Standard delivery is 3 days @ $50,000. What do you do?

If you look at the problem at face value it is a no brainier to wait the three days and save $950,000. But if you examine the entire situation and realize that the job cannot progress any further you will see that you are carrying $14 million a day x 3 days is $42 million. If you went on face value your $950,000 savings just cost you a whole lot more!

Now I understand most projects are not going to be on this large of a budget. But it's a great example because the numbers are so easy to see. Your mastery of this concept will come when you are running your smallest projects. If you can save your small business client $500 they will love you for it!

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