Small Project Cost Estimating at Percy
Project overrun refers to a case where a project takes more time than was expected. This is a common phenomenon in an organization. Before a project is undertaken, managers should carry out a careful analysis as to the duration of the project, total costs, and the manpower required for the successful completion of the project. Project overruns are costly since more time is spent doing what could have been completed, expenditure increases, and the staff becomes bored.
- The possibility of overrun occurrences can only be explained by the organization’s risk evaluation procedures. Adequately functioning risk assessment systems could probably have been used by Percy to determine the probability of such risks.
- Project overrun can also occur when an organization has poor planning systems. Strategic planning systems will include an element of risk assessment and disaster recovery management. This will ensure that managers take extra caution against any eventuality that may befall an organization.
- Another reason why Paul might have experienced this problem could be with the staff. It’s the responsibility of a manager to ensure that staffs are competent to handle the project activities. Qualified personnel provides credibility and confidence in their work, while incompetent manpower is technically inefficient.
- Paul’s assumption behavior also might have contributed to the project overrun. A good manager is one who carries out valid and accurate assumptions. It is highly likely that he traditionally assumed and provided an inaccurate budget for the project. It does not know that projects may differ.
- Finally, Paul might have failed to monitor and control the project activities. Remember that control forms a very important part of a manager’s work. Failure to provide adequate project control could lead to staff fulfilling their own personal interest. Others might have fraudulently stolen projects funds, thereby giving fictitious reports.
This report, therefore, tries to provide an insight into the fundamental differences that exist between business outsourcing and contracting. Pressure is mounting on the managers to minimize operational costs, maintain competitive advantage and the overall company image. Project procurement is a common business activity, especially for big organizations. However, careful considerations need to be taken before a decision on whether to outsource or to contract is made. If it’s in the case of a product, the manager must determine whether they buy or make it. In making these decisions, several factors, including; costs, risks, time, expertise, company secrecy, and project control, should be considered.
Making/manufacturing
Managers should be able to evaluate the benefits accruing from a product, especially when they make a decision to manufacture by themselves. However, it should be noted that making a product is associated with the following disadvantages.
Expenditure/costs
Certain products or services require more capital outlay when they are manufactured than when they are bought or contracted. The organization should be able to carefully evaluate the costs involved and therefore only makes the best economic decision.
Company secrecy
There are certain services or products that are too sensitive to be bought or outsourced. This is strategically important when a firm wants to maintain its competitive sustainability. Remember that your competitor can learn your strategy by sending an expert to your firm or rather commissioning a project for your business. This can plunge the company into serious adverse competition problems. Only services and products which are less strategic should be left in the hands of individuals.
Risks
Risks are part of project or product development. Risk a verse manager’s will always be enthusiastic to outsource projects which are perceived to be risky. This will eliminate the costs inherent in risky projects. Big projects require heavy capital investment, failure of such projects will automatically plunge the company into serious diseconomies. It is therefore important evaluate projects on risk assessment.
Time
This is a very important resource in an organization. Valid planning systems will ensure that time is devoted appropriately to every organizational aspect. Managers should determine whether they have adequate time to make or buy products and services. Staff availability is also important. If this is not the case then there will be no basis for contracting or manufacturing as they require adequate time.
Technical staff expertise
There are certain products which require special technical skills. It is the responsibility of the managers to consider that it has technical staff with relevant experience to carry out project activities. In the outsourcing the managers must ensure that the outsourcing company is technically qualified to commission a project. This will ensure that the firm meets its quality certification standards.
The difference between outsourcing and contracting
Contracting is the buying of goods and services when the ownership remains with the client while outsourcing is the process by which an organization allows its activities to be performed by another within a specified time at a considerable cost. (Salvador, 1992)
Conclusion
When making buy or make decisions its important that important factors are considered. This gives organizations opportunity to evaluate the financial effects of their decision. If this fails to be done then a firm may find itself into an impossible situation. A good company is one that considers its potential shareholders objective of wealth maximization.
List of References
Salvador, E. (1992) Ideological Diversity, Political Unity.