The Problem of Cost

Abstract

Cost is the management parameter that attracts the most attention in the organization and implementation of a project. As discussed in Chapter 2, the focus on costs is considered by some to be excessive relative to other parameters, such as project relevance. In the long-term view, it may turn out that cost overruns are only of minor importance in project profitability and benefit. Yet in other cases, cost overruns may comprise a death blow. Cost is eminently suitable as a management parameter, because it is expressed quantitatively with great precision and is continuously updated as a part of all transactions in a society. Costs are suited to making participants accountable, to gauging progress and result attainment and to comparing expenses with income to assess economic viability over time.

There are two material aspects of project cost estimation. Firstly, the earliest estimates often are far too low, though they frequently are decisive in the acceptance or rejection of a concept. Secondly, minor adjustments usually are made in the last part of the front-end phase to make the budget proposal realistic. The first attracts little attention compared to the second. A million dollars lost is worth no more than a dollar wasted.

–Anon