Reduction of project costs and at least avoiding significant cost overrun is one of the high priority tasks for a project manager. However, it usually becomes challenging due to a great number of factors: underestimation of project costs, uncontrolled changes, poor resource allocation, etc. In addition, managing any project is accompanied with uncertainty that can add to cost overrun. So, what should project managers know to keep control of project budget and reduce project costs?

Causes for Cost Overrun

To begin with, let’s consider the factors that cause cost overrun. Eliminating them is halfway to success if we want to reduce project costs.  

  • Poor estimates 

Project estimation involves prediction of time, cost, and resources required for completing a project. As a result, all the project participants have a clear understanding of what the project scope will be, how much time and money they will need to complete it, and what possible risks there are. If these estimates are inadequate or unrealistic, it can become the reason for cost overrun as long as all the project components are interrelated and interdependent. For example, unrealistic scope estimates can result in unforeseen costs that will exceed the budget as well as cause project delays that will also contribute to cost overrun.  

  • Scope changes 

Changes to project scope are unavoidable and sometimes even necessary, but it’s extremely important to keep them under control. Otherwise, they can result in scope creep, which in turn leads to rework, overloaded and disengaged employees, project delays, and cost overrun. 

  • Poor budget management

The process of managing project budget usually involves 3 steps: planning the costs, developing the budget, and monitoring how the budget is spent. Controlling project costs is a continuous process conducted throughout the whole project lifecycle. When there is no control over costs, they aren’t monitored or reviewed and compared to the baseline, the project can easily exceed the budget.  

  • Project delays

There are a variety of reasons for project delays: anything can go not the way it has been planned. Delays can be caused by external factors such as disasters or the internal ones, e.g. unrealistic requirements or expectations, changes to project scope, unavailable resources, etc. Time is money, as we know, so project delays usually add to project costs.   

  • Improper risk management 

Project risk refers to the scope of a project, its budget, resources, time, and so on. According to the PMBOK Guide, “the objectives of project risk management are to increase the likelihood and impact of positive events, and decrease the likelihood and impact of negative events in the project”. If project risks are not taken into account and managed properly, the probability of negative consequences of unexpected situations increases. What’s important is that negative  events affecting any of the project components, whether they are timeline, scope, resources, or budget, can lead to cost overrun. So, this aspect of the project management process shouldn’t be overlooked if we want to reduce project costs.  

Read more: Project Risk Management: Importance, Challenging Issues, Recommendations

  • Poor resource management

Successful project delivery is largely dependent on available human resources. In the present-day dynamic business environment with multiple projects running simultaneously, lack of human resources is a typical problem. In addition, a lack of proper resource management leads to the situation when project resources are unavailable when needed. It causes delays in delivering tasks and even the whole project, which in turn results in cost overrun.  

Tips on Reducing Project Costs

The tips listed below aim to prevent the causes for cost overrun and reduce project costs at the same time. 

Improve project estimates 

This process should include definition of project work needed to be done, estimation of the work by employees who are expected to perform it or by corresponding experts, and identification of risks. It’s also important to be realistic in your estimates to avoid any unexpected consequences and unforeseen costs. In other words, you have to be sure that the project is estimated accurately, the available budget is allocated properly and you have the tools to control project costs.

Don’t let changes derail the project

There are two important aspects here:

  • Setting clear requirements

It’s important not only to gather the requirements of stakeholders and/or customers, but also to prioritize them and make sure that they are realistic and achievable. Documenting them is also important as this document can be used as a baseline if someone decides to change them. Otherwise, a project manager may have an unpleasant surprise with the project team trying to meet stakeholders’ or clients’ inflated requirements that are not achievable within the allocated budget. 

  • Managing changes

Сhanges to a project should be made after thorough consideration of consequences they will have for a project and following change control procedure that consists of three stages: receiving a request for changes, analysis of the feasibility of these changes (how they will affect the project budget, schedule, and resources) and possible risks, and making a final decision. Such a formal procedure will minimize the probability of negative consequences of changes that will cost extra money.  

Read more: Changing Requirements in Project Management: How to Stay on Track

Use a project baseline to assess the state of your project 

Monitoring a project baseline (including scope, schedule and cost baselines) helps project managers estimate the current state of a project to make sure that it’s on the right track. Therefore, a baseline makes it much easier to prevent your project from scope creep, significant delays or cost overrun. If baseline analysis reveals any weak points in a project, a project manager together with the project team will be able to take timely actions to avoid any bottlenecks or even project failure. 

Manage risks

Knowing the sources of possible risks and ways to respond to them will keep you prepared for any events that may occur to a project’s scope, resources, time, or budget. Preparing a risk management plan at the beginning will enable you to count on some extra costs that may be required in case something unexpected happens. A critical team member may fall ill, a piece of important equipment may break down, or a heavy rain may cause significant transportation delays – it’s better to be realistic and think of how you will respond to potential risks.    

Keep control of the project budget

Use a cost baseline to compare actual costs to the planned ones and keep track of increasing project costs on a regular basis. Consistent monitoring of project costs will help you identify and resolve any financial issues.  

Take measures to avoid project delays

  • One of the ways to protect your project’s due dates is establishing a time buffer that is added to the end date of a project’s timeline (instead of adding it to each task). 
  • Proper resource and skill management makes it possible to utilize available resources to the full and avoid delays related to resource unavailability. It also prevents employees from overload: it’s one of the serious issues that can significantly disrupt the work on a project and add to project costs. Finally, it will improve employee efficiency, which will also have a positive impact on reducing project costs.

Reduce project scope and/or duration

Setting right priorities will help you reduce the scope and/or duration of a project in the following ways.

  • Task prioritization involves changing the focus from task deadlines to performing high priority assignments as soon as possible: this will protect your employees from negative effects of student syndrome and Parkinson’s law, and enable them to deliver their work faster and with less effort and in this way may reduce project duration.  
  • If it’s impossible to fit into available budget with the expected scope, re-negotiate it with customers/stakeholders and agree upon performing only the highest priority tasks.

Take advantage of project management software solutions

In fact, utilization of PM software cannot reduce project costs by itself. However, it can optimize the work on a project in such a way that you will have opportunities to reduce the costs. Let’s consider the features of Epicflow, multi-project resource management software, as an example.      

Burnup Chart and Dashboard: Keep control of your project budget

These two graphs show the most important and up-to-date information about project budget, so a project manager can easily monitor it along with the project flow. It’s also important that you can monitor all of the projects if you work in a multi-project environment.   

Burnup Chart shows three types of project costs:

  • Approved cost indicates the planned budget (marked with a red line),
  • Total expected cost is marked by a purple line; it indicates estimated costs including the budgeted and scheduled ones (budgeted costs mean what we have in reserve, while scheduled costs are those that have been already assigned).  
  • Burned costs are marked with a black line and indicate the costs that have been spent on a project. 

Besides, you can monitor the financial state of all projects switching between them or see the combined status for all of them. 

Dashboard is another tool that shows the state of your projects and the remaining buffer. Its feature is Bubble Chart that presents projects in the form of bubbles different in size and color depending on the state of corresponding projects.  


In the Bubble Chart, you can choose a budget view that shows budget utilization percent (in manhous) in relation to lead time. Dot-dash circle indicates budget utilization: if it’s over the bubble, you have a buffer; if it’s around the bubble, no buffer is available; and if it’s less than the bubble, you’ve spent more than approved.   

Thus, these two features allow a project manager to monitor the flow of all the projects as well as to make sure that they won’t exceed the limits of the approved budget. 

Task List: Focus on the most important tasks to deliver faster

This feature shows the list of all the user’s tasks that are automatically sorted by priority. The highest priority tasks appear always on top, so the team members will always be aware of what they should focus on. Besides, if any changes are made, the task priorities will be recalculated automatically by the system. Such an approach will allow the project team to deliver their work as soon as possible, which in turn contributes to saving time and costs. 



Reducing project costs is a really challenging task for a project manager, which requires certain efforts on the part of all the project participants: constant control and management of project costs, assigning perfectly matching resources for completing project tasks, managing possible risks and improving estimation process, prioritizing tasks and delivering them as soon as possible instead of performing them by an established deadline, etc. The solutions provided by smart PM software will also be a great help on this way.