Project cost management can be a struggle. Between supply scarcity and competition for labor resources, teams may have only ability to influence costs. When you’re faced with few options, it may be time to take a fresh look at your approach to cutting expenditures to see where new strategies can help you reduce outlays. If you’re finding it difficult to trim costs, consider if your team is sabotaging your cost-saving efforts without realizing it.
1 – Consider different options for spending project funds
Negotiating a better price for goods and services may be the first step in reducing your project budget, but your cost-saving strategy shouldn’t end there. For example, it may be less expensive to pay for certain services as you go rather than agreeing to a high-dollar retainer. You’ll need to carefully assess whether you’re likely to consume the full value of the retainer or not, since pay-as-you-go pricing is typically higher for the same level or volume of services.
2 – Avoid increasing one line item to save on another
The tendency to look for the low-hanging fruit among your budget’s line items can sometimes backfire, so be mindful to review your entire budget when evaluating cost-saving opportunities. Putting in the effort to shop around for less expensive materials doesn’t ultimately save money if the additional time it takes to make that purchasing decision results in the need to pay expedited shipping surcharges to maintain the project schedule. Look at your project budget in its entirety to see where you can reduce spending without sacrificing a line item somewhere else.
3 – Let your project leaders handle price negotiations
If project team members have been using a core group of vendors for several years, they’re likely on friendly terms and it can sometimes be difficult for them to step back and shift into cost-cutting mode. A more effective strategy may be to turn price negotiations over to senior project leaders or even a trusted project management consultancy partner, who can maintain a more neutral perspective to secure more favorable costs for products and services.
4 – Channel your creativity
For some products and services, a few select suppliers are the go-to choices in the marketplace. Because vendor scarcity can reduce price competition, your team should determine if that small pool of providers genuinely represents all available options. Extend that creativity to see where other sourcing alternatives might enable your team to capture better pricing elsewhere, too. When a project calls for additional equipment, consider if used equipment is a viable option rather than buying new. Depending on the requirements—perhaps you’ll need to maintain two production lines until the legacy line can be absorbed into the updated line—you may even be able to rent equipment to get you through a transitionary period.
5 – Get down to the root causes of unnecessarily high costs
Rush shipping fees, pricey off-hours labor rates, last-minute travel costs—rather than trying to negotiate better rates for these line items, you may be able to avoid them entirely by doing some additional hard work up front. You don’t just need to complete the planning phase on time, you should also focus on having key purchasing decisions made and agreed upon far enough ahead to eliminate unnecessary costs. This could be difficult if your stakeholders and sponsors are accustomed to waiting until the last minute to finalize supply specifications or choose a vendor, but a candid conversation about the additional expenditures the project will incur if things aren’t handled early can help get everyone in a cost-saving frame of mind.
PMAlliance, Inc uses a team of highly experienced and certified professionals to provide project management consulting, project management training and project portfolio management.