Successful project cost management involves the systematic process of planning, estimating, budgeting, financing, funding, overseeing, and controlling costs to complete a project within the allocated budget.
Optimizing resource allocating yields huge enhancement in project performance, and maximizing return on investment. Additionally, having a dynamic cost management strategy based on project progress and changing circumstances are essential to adapt to unforeseen challenges and ensure the project’s financial viability.
Project cost management goes through various steps, as we dwell into more details in this article, we will discover in detail what the role of a project manager lead is.
What Does a Project Cost Lead Do
Project cost managers play a vital role in ensuring that projects stay within budget and achieve their financial goals.
Let’s consider a practical example of a Henry Mayo Newhall Hospital case study. Here’s some background: Henry Mayo Newhall Hospital is a 357-bed not-for-profit community hospital and trauma center in Santa Clarita, California. Jay Arcilla, Director of the Performance Excellence Office, was tasked with improving the performance of the Outpatient Surgical Center (OPSC).
This hospital had challenges in starting the day’s first scheduled in-patient or out-patient surgery on time has a significant impact on subsequent surgery timelines and meeting schedules can be challenging, especially during the pandemic, which introduced additional hurdles such as supply shortages, documentation, and personnel availability. The goal was to raise surgery on-time start times to 70 percent to improve patient care and operational efficiency.
Jay Arcilla collaborated with project managers and stakeholders to develop a detailed plan, the plan included identifying influencing factors, analyzing root causes, and creating consensus-driven solutions.
Arcilla estimated the costs associated with implementing various solutions. He also allocated financial, personnel,and technological resources to support the project.
How do Arcilla go about implementing these strategies? First, he created electronic signage, as he placed signs within the OPSC which made it easy for staff to find patients. He also commanded interdisciplinary team sessions which helped analyze root causes and create consensus-driven solutions. He created dynamic dashboards with tools such as Power BI to create high-visibility visual aids where he represented the process from the end customer’s perspective, which made it much easier to draw insights and detect drawbacks. He regularly disseminated the information and discussed the outcomes with stakeholders. In addition to setting an escalation plan held all staff accountable for showing up to first cases on time.
Arcilla continuously monitored progress, tracked expenses, and adjusted strategies as needed, and regularly reported progress and improvements to ensure transparency and stakeholder confidence.
His effective project management resulted in significant increase of on-time surgery start times, improving patient care and overall efficiency.
Let’s summarize the steps that Arcilla went through as a project lead:
First, Arsilla started with comprehensive planning as he gathered with his team to put together a solid plan that everybody is good with. Second, he performed cost estimation and budget development via allocating resources effectively to support the project. Third, he started to execute the strategies outlined in the plan by creating the electronic signage, the work sessions, the dashboards, and communicating with his team regularly to discuss the progress. Finally, Arsilla monitored the progress through a feedback loop of identifying drawbacks and deficiencies and immediately setting up an action plan to fix them.
Why Cost Management Matters?
Project cost management is crucial for several reasons:
Budget Control
It is important for a project to stay within its allocated budget. Closely monitoring expenses and making necessary adjustments, project managers lead to prevention of budget overruns as it contributes to project stability and success.
Resource Optimization:
It enables organizations to optimize resource allocation, including finances, manpower, materials, and equipment. By allocating resources efficiently, projects can achieve their goals while minimizing waste and unnecessary spending.
Risk Mitigation
Cost management helps identify and mitigate financial risks. By anticipating potential cost fluctuations, project managers can proactively address challenges and avoid surprises. This risk management approach enhances project resilience.
Stakeholder Confidence
When stakeholders see transparent and effective cost management practices, their confidence in the project increases. Clear communication about costs, progress, and financial decisions fosters trust and collaboration among team members and external partners.
Competitive Advantage
Organizations that consistently manage costs well gain a competitive edge. They can offer competitive pricing, invest in innovation, and deliver value to clients. Cost-efficient projects position companies for long-term success.
Project Success:
Ultimately, effective cost management contributes directly to project success. It ensures that the project achieves its objectives while maintaining financial health. Successful projects enhance an organization’s reputation and pave the way for future endeavors
What are The 5 Factors of Cost Control?
Cost of Labor
The cost of labor includes wages paid to employees working on a project, along with employee benefits and taxes. Managing labor costs involves optimizing workforce efficiency which minimizes overtime and ensures fair compensation.
Cost of Materials
The total cost of supplies, equipment, and materials required for a project falls under this category. Effective cost control involves sourcing materials at competitive prices, managing inventory efficiently, and avoiding wastage.
Actual Cost
Actual costs refer to the real expenses incurred during project execution. Monitoring actual costs against budgeted amounts helps identify deviations and allows for timely corrective actions.
Cost Variance
Cost variance is the difference between budgeted costs and actual costs. Analyzing these variances helps determine the areas where adjustments are needed. For instance, if material expenses exceed the budget, seeking alternative suppliers may be necessary.
Return on Investment (ROI)
While ROI isn’t directly a cost factor, it’s essential for assessing the effectiveness of cost control efforts. Calculating ROI helps determine whether the benefits gained from cost-saving measures justify the associated expenses
In conclusion, a project cost controller’s role is vital in any established organization to effectively allocate resources, gain stakeholders confidence to ensure project success and establish a competitive advantage. Jobzella can help you find a project cost controller for your organization through our recruitment platform!
