Monitoring project costs. A penny saved is a penny earned. Or is it?

15 February 2012

I recently read an article where it described the U.S. Mint’s challenge in producing pennies and nickels at a cost more than their actual value.  In 2011 it cost the US Mint 2.4 Cents to produce a penny and 11.2 cents for every nickel produced.  I guess the old adage “A penny saved is a penny earned” does not apply to the US Mint.  Ironically, every penny has put the Mint 1.4 pennies in the hole.

This story leads me to think that monitoring project costs is more than a reactive activity where the project manager keeps track of the allocated budget.  Monitoring project costs needs to be a proactive activity where all the potential costs incurred throughout the life cycle of your project are tracked to maximize profitability and margins wherever possible.  As an example, in most projects the biggest asset is your people.  Lost time incurred by your people on projects can mean significant lost in revenue, profitability and margins.   If your resources time are not effectively monitored, it increases your project risk in loss revenue and margins.  Lost time typically means your resources additional effort on activities will not only increase the overall cost of the project, but also impact the opportunity cost potentially missed by your resources working on on other value-add and/or revenue generating activities.

In the real world, projects will shift based on unpredictable changes.  These changes which are intimately linked to costs need to be carefully monitored.  The reality is, what is planned rarely mirrors the actual costs and time invested in a project.  After all, taking on a project needs to be a business decision that will positively impact an organization’s Return on Investment (ROI).

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