SPB Process Management in the delivery of Projects

It is common for the first question from the client being "How much will this cost"?

SPB Solutions initial response is that every project is different and has many different factors that can contribute to a good or bad project. SPB's first question to the client is,

"How much money do you think you are losing on each project"?

Typically this is not monitored by many companies, which is why I show this typical example of some of the monies that can be lost and why.

Possible Costs to a Project

Location based PM leaves the company – The replacement may have to fly in and out. Flights and accommodation costs add $1,000-$2,000 per month to the project. Lets call it an additional $24,000 for 12 months.

Recruitment of a new PM could cost $16,000 - $25,000 with the recruitment company alone.

Handover could take about 1 monthly so this will be double pay for a PM - $10,000 - $15,000 per month.

Efficiency of the new PM assume 3- 6 months before fully functioning PM. Let's assume $30,000 cost for the inefficiencies during this 6 month period ( works out to approximately 1 hour/day lost).

If the job is in that much of a mess you could lose another PM off the job too. 50% of above costs ( $47,000).

Approximate total cost for losing a PM could amount to: $141,000 for just one project. This does not include all the mistakes that occur during this period. We could assume 2.5% of the contract value. For a $6 mil contract with 10% profit, this could be an additional loss of 25% off the profit margin. This could be a total of $291,000 lost on a project.

The final question is, if the predicted profit was 10%, is the project a success if it still made 10%? This is the heart of what a company deems as a successful project or not. Only then can you get to the heart of whether process management is needed or even wanted.

13 views0 comments

Recent Posts

See All