Change orders in projects are the norm, not the exception, so the seasoned project manager won’t be stumped by recasting the budget to account for altered objectives. How well you can adjust your budget to a scope change depends on how well you budgeted the project in the first place.
Let’s see how to manage your budget when the scope changes in 10 steps and how Cleopatra Enterprise, our project cost management software tool, fits in this approach.
1. Start with the work completed
See how the project plan looks when you add the new objectives. How many more resources do you need? The knowledgebases of Cleopatra Enterprise let you break down the scope in small parts. Then see what can be tweaked to keep you on or close to budget with the new objectives, e.g., removing nice-to-have features.
2. Compare your budget to actual spending
Identify how much of the original budget has been spent, and how much remains. If you’re using a good cost management tool like Cleopatra Enterprise, you should be able to figure this out pretty quickly. This information gives you a reality check of where you stand versus budget. And don’t forget: Focus on the significant variances from the budget; don’t sweat the small stuff.
3. Scrutinize scope
Assess whether the change order affects your deliverables and if it consequently affects the resources to produce those deliverables.
4. Determine the impact of the change order
Assess whether the change order affects your deliverables and if it consequently affects the resources to produce those deliverables. Determine how much funding is needed to achieve the new objectives. The estimated change can be transferred into the cost management document for analysis and forecasting.
5. Negotiate with your client
Once you know how much your project will cost to complete with the change order, it’s time to let the client know. If you’ve done your homework, bring up any specific elements of the deliverables that would be difficult or costly from your estimate in Cleopatra Enterprise. Give the client the full picture and try to make the conversation show that you’re in this together, and not working against each other.
6. Renegotiate with outside contractors if needed
If the change increases project scope, you might need to hire external resources. If the budget is slashed, you face the delicate task of reducing the amount of work for your contractors, and even laying some off, while keeping the team motivated and focused on meeting the new deliverables.
7. Be transparent
Keep your team informed of all change orders and budget updates. Team members want to know how the changes will affect them. Let them know so they can focus on their work, rather than worrying about what’s going to become of the project (and their contribution to it). Furthermore, when you’re open about scope changes, team members can contribute ideas and solutions. Report and communicate information using the flexibility of breakdown structures of Cleopatra Enterprise to prevent miscommunications.
8. Design a new work plan and budget
Keep your team focused on the new deliverables. Use a project planning software to outline the plan so individuals can recalibrate what they must do and when they need to finish their work. Synchronize the new schedule with the allocated budget as the new baseline for cost management. Cleopatra Enterprise allows for tight integration with planning and estimating tools to streamline this process.
9. Continue to manage project scope
The change order gives the project a new scope, but that doesn’t mean you’re immune from any future scope creep that can wreak havoc on your budget. Try to put yourself in a proactive position, rather than a reactive one. Use the Cleopatra Enterprise’s dashboards to measure your project’s performance and get early warning signs.
10. Manage client expectations
A change order process can make your client more anxious than usual to see how you deliver. Keep your client updated and communicate clearly about how the project is progressing—and how any possible glitches might affect the timeline. The first few status meetings or reports after a change order take on greater importance for the project manager, team, client and your organization. The more you stay in touch with your client, the fewer unpleasant surprises you have to deliver, which is good for everyone.
The 10 steps are taken from the article of Tim Clark.
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