Cost Performance on Project S Often Poor, What Are the Possible Causes of This and How Can It Be Improved?

Topics: Cost overrun, Project management, Cost Pages: 7 (2267 words) Published: December 4, 2012
‘’Cost performance on project s often poor, what are the possible causes of this and how can it be improved?’’

The cost planning is one of important phases for project management. It will goes through whole project’s life cycle. It is foundation of project and it will tell the project are measured, reported and controlled in every process. Estimating is the process of forecasting or approximating the time and cost of completing project deliverables. A successful project management will include time control and cost planning. Accompany with these two important features, and then bring out the best quality project. Causes of poor cost performance

According to many decades’ records, Morris et al. (1989) has researched more than 4,000 projects between 1959 and 1986, after this, he concluded that projects are normally poor at achieve their targets. *From example of helicopter Comanche which is largest acquisition program in U.S. army ($ 48b). It is purpose to replace whole school of light utility reconnaissance and attack helicopters with one helicopter that makes military gears be modular designed which already used in many kind of armoured machines, it is easier to fix and replace. However, this project has begun in 1983, and it is been 5 times restructured, furthermore, it’s cost growth in product development 101% and schedule growth in product development 120%. Finally, it has been cancelled in 2004. This activity is to avoid sunk cost that done by this overrun project, economist normally suggest to do this way, because it is only suffering in early stage, and it will saves opportunity cost. In general, this shows lack of planning, without good planning, there are several areas will affect on cost estimating, and then directly affect on cost performance that leads to delay of time and cost overrun. Time management

Delay is the most common problem of poor cost performance in projects, from road building project to the most complex project, such as launching satellite and project Comanche. Delay is defined as the time overruns either beyond the completion date specified in a contract, or beyond the date that the parties agreed upon for delivery of a project T.R.Puspasari (2005). The results of delay often give owner loss on revenue, to the contractor, delay means higher cost through labour cost increases, inflation of material cost and longer construction period. With longer period of project, sometimes occur vicious cycle. It will damage the whole project performance. Thus the first thing is estimating a approximately cost and time. Error of design

One main reason for overrun of cost is design error that basically means representation is not reach the requirement of client, it is often wrong at project deliverables. It also directs to a different way on application, and at the end of phase, errors will show off from wrapped package. Furthermore, having a design error also leads overrun on cost estimating, which is omission will be included in it, by this means change of order, longer period working will occur. Equally, project design that has not extensive research and investigation will restrain potential error. It also could goes to extra work, repeatedly to scope the project, through these additional work, there will definitely influence on project, and triggers more cost and fail to delivery on time A.Ambituuni (2011). Avoiding the design error that has to has participation of professional expertises and application of proficient gears right through the project Bordat et al (2004). Thus, to achieve an error free project, need every one in project group have excellent communication, must ensure the design process is accurately considered and grant enough time for extensive research and investigation. In the same way, a decent project could makes the project lift cycle is created by effective planning, controlling and monitoring, which means could achieve better cost performance result.

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