Goal: Optimize the project plan to meet the budget - Project

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Goal: Optimize the project plan to meet the budget

Applies to
Microsoft Office Project 2003 Microsoft Office Project Server 2003 Microsoft Project 2000 and 2002

After you build your project plan, review the planned costs. If the planned costs (planned costs: The latest cost of tasks, resources, assignments, and the entire project, which Project displays in the Cost field as cost or total cost.) do not meet your budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.), you can optimize the plan to stay within your budget. As you change the budget, remember that you are likely to change the finish date (finish date: The date that a task is scheduled to be completed. This date is based on the task's start date, duration, calendars, predecessor dates, task dependencies, and constraints.) or scope (scope: The combination of all project goals and tasks, and the work required to accomplish them.) of your project. This relationship between time, scope, and budget is often referred to as the project triangle (project triangle: The interrelationship of time, money, and scope. If you adjust any one of these elements, the other two are affected. For example, if you adjust the project plan to shorten the schedule, you might increase costs and decrease scope.).

Tip This article is part of a series of articles that describe a broad set of project management activities. We call these activities "goals" because they are organized around the project management life cycle: Build a plan, track and manage a project, and close a project. The project life cycle is outlined in The Project Map, where you can find a link to an article about each project management goal. Most of the articles include links to supporting information or procedures that you perform in Project or Project Server. These "goal" articles were designed to help you not only use Project but also better understand project management.

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See all goals on the Project Map

number 1 View cost totals You can view totals, costs over time, or costs in a chart. This can help you to see whether you are meeting your targeted budget and whether you need to adjust your costs.

View cost totals

Number 2 Optimize the plan to decrease costs If you determine that the planned costs do not meet your targeted budget, you can use several strategies to cut costs.

Adjust resources to meet the budget
Click all of the following that apply:
- Change the cost rate tables on a resource assignment if the resource is assigned to a task that has an applicable rate lower than the default (Table A) rate.
- Replace a resource assignment to cut costs by replacing a more expensive resource (a person, equipment, or materials) with a less expensive one. Sometimes using less expensive resources results in corresponding tradeoffs of decreased scope, longer schedule, or lower quality. Still, this is one of the most realistic strategies for optimizing costs.
- Remove a resource assignment if you have other, comparable resources already assigned to a task. If you remove a more expensive resource from the assignment (assignment: A specific resource that is assigned to a particular task.), this resource is free to work on other tasks or projects that are more cost-effective.
- Adjust the time a work resource spends on a task by reducing the amount of work assigned to a resource or reducing the resource's assignment units (units: The quantity of a resource assigned to a task. The maximum units is the maximum number of units available for the resource. For example, if you have three plumbers, the maximum units is 300 percent or three plumbers working full-time.) on the task.
Adjust costs to meet the budget
Click all of the following that apply:
- Reduce pay rates and fees for resources by entering new rates and per-use (per-use cost: A set fee for the use of a resource that can be in place of, or in addition to, a variable. For work resources, a per-use cost accrues each time that the resource is used. For material resources, a per-use cost is accrued only once.) fees for resources (resources: The people, equipment, and material that are used to complete tasks in a project.), such as people and equipment. Project can then calculate new cost totals for resources, assigned tasks, and the entire project.
- Reduce fixed task costs if you want to change a set amount for the use or purchase of resources, such as equipment. Project can then incorporate this fixed cost in the total cost of summary tasks and the entire project.
- Reduce material costs if you are using consumable resources, such as supplies. Project can then calculate new cost totals for these material resources (material resources: Consumable materials or supplies, such as concrete, wood, or nails.) from the base rates and quantities that you enter.
- Change cost rate tables on a resource assignment if you want to apply new resource rates that you entered in different rate tables (cost rate table: A collection of information about a resource's rates, including the standard rate, overtime rate, any per-use cost, and the date when the pay rate takes effect. You can establish up to five different cost rate tables for each resource.).
Reduce project scope to meet the budget
Click all of the following that apply:
- Determine whether to change the deliverable or the scope
  You might need to reduce the scope (scope: The combination of all project goals and tasks, and the work required to accomplish them.) to meet the finish date or the budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.). Or, after building your project plan, you might find that you have more time or money than expected. In either case, you can change the scope of the project. You can choose between changing the deliverables (deliverable: A tangible and measurable result, outcome, or item that must be produced to complete a project or part of a project. Typically, the project team and project stakeholders agree on project deliverables before the project begins.) of the product or changing the scope of the project.
  - Cut product deliverables If you reduce the scope by cutting the product deliverables, you are actually providing less to the customers or stakeholders than you planned. For example, suppose you are working on a new product development project. To meet the finish date or budget, you decide to cut features from the product that were originally planned and approved by the customers. In this case, you probably need to obtain customer approval, and you may need to adjust the contract, if applicable.
  - Cut project scope You may be able to provide the same product deliverables by changing the way you produce them. For example, on the new product development project, you decide to remove a market research task, and you also reduce the duration of product testing in order to meet the finish date or budget. In this case, the end product and deliverables don't change. However, you changed the method for providing this end product by reducing the scope of the project.
  - Use available time or budget If you find that you have more time or money than expected, you can add deliverables. Or you can increase the scope of the project itself, which often results in a higher quality product.
  - Consider the impact of the scope on quality You might need to reduce the scope to meet the finish date or the budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.). Or, after building your project plan, you might find that you have more time or money than expected. In either case, you can change the scope of the project. Consider that quality and scope are closely related. If you cut the scope, you might have to accept a reduced level of quality. If you increase the scope, you probably will increase quality in the project and the resulting product.
- Change a duration by reducing the amount of time planned for tasks. Make sure that the reduced duration still allows the work to be completed. Also be sure to adjust the corresponding amount of work assigned to resources.
- Remove a task if it is not absolutely necessary. But be aware that removing tasks can decrease the quality of the overall project implementation. Tasks that must be done should still be reflected in the plan, and only those tasks considered optional should be removed.
- Replace a resource assignment by replacing a more expensive resource (a person, equipment, or materials) with a less expensive one. Sometimes using less expensive resources results in corresponding tradeoffs of decreased scope, longer schedule, or decreased quality. Still, this is one of the most realistic strategies for optimizing costs.

Number 3 Adjust the plan to take advantage of additional budget After you build your plan, you might find that you have more budget available. You can choose to bring the project in under budget. Or you can increase the scope and quality goals for the project.

More . . .

After you build your plan and Project calculates the schedule (schedule: The timing and sequence of tasks within a project. A schedule consists mainly of tasks, task dependencies, durations, constraints, and time-oriented project information.) and cost (cost: The total scheduled cost for a task, resource, or assignment, or for an entire project. This is sometimes referred to as the current cost. In Project, baseline costs are usually referred to as "budget.") for the project, you might find that you have more time or an increased budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.) available. You can choose to end the project ahead of schedule or under budget. Or, you can increase the scope (scope: The combination of all project goals and tasks, and the work required to accomplish them.) and add quality (quality: The degree of excellence, or the desired standards, in a product, process, or project.) to the project.

Check with the customer Ask the customer or stakeholders (stakeholders: Individuals and organizations that are actively involved in the project or whose interests may be affected by the project.) of the project how they prefer to use the time or budget. They might prefer to leave the plan as is and have the project come in ahead of schedule or under budget.
Check your contract Check for contractual incentives (or in some cases, even penalties) for coming in ahead of schedule or under budget. The type of contract (fixed price, cost reimbursable, or unit price) may determine how you should take advantage of available time or budget.
Add scope You can add the tasks (task: An activity that has a beginning and an end. Project plans are made up of tasks.) or phases (phase: A group of related tasks that completes a major step in a project.) that you wanted but thought you wouldn't have enough time or money for. You can increase duration (duration: The total span of active working time that is required to complete a task. This is generally the amount of working time from the start to finish of a task, as defined by the project and resource calendar.) on existing tasks so that resources (resources: The people, equipment, and material that are used to complete tasks in a project.) have more time to complete them. Be aware that adding scope is likely to add both time and cost to your plan. Changing scope and deliverables (deliverable: A tangible and measurable result, outcome, or item that must be produced to complete a project or part of a project. Typically, the project team and project stakeholders agree on project deliverables before the project begins.) may have contractual implications, so be sure to check the contract and obtain client approval when necessary.
Raise the standard of quality You can use surplus time or budget to add tasks or phases that add or check for quality. You can increase duration on existing tasks, so that resources have more time to do higher quality work. Another way to raise quality is to add more highly skilled staff, more efficient equipment, or higher grade materials. These types of resources can be more expensive, but they can also be a good use of surplus budget.

Number 4 Enter a note about cost changes Log information about changes you made to meet the budget. Such notes can be helpful when you are tracking actual progress, closing the project, or collecting data for the next project.

Add a note about changes

Number 5 Evaluate the results of cost optimization Check to ensure that you did indeed lower costs, and that the finish date, workload, and other projects were not adversely affected by these changes.

Click all of the following that apply:

View cost totals to see whether you lowered the project costs and how close you are to meeting your targeted budget.
Show the critical path to see how the changes you made to optimize for costs affected the critical path. You might see different dates, different tasks, and different resources associated with the critical path.
Review resource workloads to see if any assigned resources are now overloaded or underutilized as a result of your cost optimization efforts.
Check impact on other projects to ensure that any changes are updated in other project files that are linked to or consolidated (consolidated project: A project containing one or more inserted projects [also known as subprojects]. These can retain links to their source projects and may be linked to one another. A consolidated project is also called a master project.) in your project.

Number 6 Communicate assignment changes to resources If you assigned new tasks to resources or changed or removed existing assignments, you need to communicate these changes to the affected resources, either electronically or by printing assignment reports.

Communicate assignment changes to team members

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