Why Are Projects Over Budget?

It's a project management epidemic. For years now, the figures have remained pretty much the same. Seventy-five percent project failure rates, many of which come in over budget.

I believe there are three reasons for this.

1) Project managers not tracking the budget closely enough. My view on this is that this is the least frequent reason. Project managers are under siege to monitor costs closely (and it's an indelible part of the process in some organizations), and still the projects don't come in on budget.

2) Bad estimates. Now we're getting closer. Are we learning from mistakes? Do we have checklists to alert us to necessary resources and standard execution times for tasks? If so, much of this can be remedied fairly easily.

3) Pressure to lowball the budget to get the project approved. Ah-ha! This is the silent killer of projects. I contend that project managers frequently either feel compelled to promise a low budget or are pressured to succumb to a low budget in order to get a project approved, and that this is the reason why most projects end up over budget.

In a worst-case scenario, all three reasons exist (and, indeed, this happens more often than we care to admit), but I contend that the third is the most overlooked cause of project failures.

Lesson: Don't feel pressured to come in with a lower budget than you anticipate the project will really need. Stick to your guns when it comes to presenting the case. If the project gets declined, you're better off.