22 March, 2022

Don’t Let Your Project Get Caught in the Cost Trap | Video

The Time-Cost-Quality Triangle or the Time-Cost-Scope Triangle are key concepts in Project Management. When you understand the Iron Triangle, you can assess most of your project problems. But it can also create a trap that far too many businesses fall into. And Government departments and not-for-profits too. It’s the Cost Trap.

This video is safe for viewing in the workplace.

This is learning, so, sit back and enjoy

Beware the Cost Trap

Project Managers understand the trade-offs between time, cost, scope, and quality. And we try to become adept at determining our sponsors’ priorities. But we often fall into a trap at one corner.

Language Matters

It comes about at the corner labeled cost. It’s particularly prevalent in projects with a large procurement or outsourcing budget. We get hooked on keeping costs down.

So, we negotiate hard with suppliers. We drive their margins down. That way, we can keep more benefits for our project’s sponsoring organization.

There’s a Price to Pay for Low Cost

A supplier with squeezed margins will, at best, be niggardly in their collaboration. They will try to recover margin through any savings they can make. And they’ll impose high costs for contract variations and changes.

And once you are locked into that supplier’s services, products, or technology… Ongoing services, renewals, and upgrades all become very costly.

‘Cheap is dear’

…said my father

At worst, the low margin will place them in a precarious commercial position. This can drive disruptive behavior, or even threaten their viability. I’ve seen vendors withdraw late in a project. They preferred the penalties to losses from under-priced contracts. And sometimes contractors fail, leaving a mess of liquidation issues.

The Answer to the Cost Trap is to Scrap Cost

I’m not saying don’t prioritize that corner of the triangle. But stop thinking of it as ‘cost’. Think of it, instead, as ‘value’. And measure value in a broader way than just price.

The same, by the way, goes for everything.

Even your household purchases!

Project Procurement

A question I answered in a recent video was:

‘Should project managers get involved with contract negotiations. Or is that best left to procurement people?’

And my answer was simple: ‘Absolutely we should’

If we leave the negotiations to procurement teams, then they will base their decisions on:

  • Procurement rules, and
  • Simple measures of value… like cost

It’s the needs of the project that matter. And that means balancing time, scope, quality, and value.

Learn More about Project Procurement

If you want to learn more about project procurement and go beyond this opinion piece, take a look at our feature article: ‘Project Procurement Management [All the basics you need to know]’

Carefully curated video recommendations for you:

What Kit does a Project Manager Need?

I asked Project Managers in a couple of forums what material things you need to have, to do your job as a Project Manager. They responded magnificently. I compiled their answers into a Kit list. I added my own. 

Check out the Kit a Project Manager needs

Note that the links are affiliated.

Learn Still More

For more great Project Management videos, please subscribe to the OnlinePMCourses YouTube channel.

If you want basic Management Courses – free training hosted on YouTube, with 2 new management lessons a week, check out our sister channel, Management Courses.

For more of our Project Management videos in themed collections, join our Free Academy of Project Management.

For more of our videos in themed collections, join our Free Academy of Project Management

TWEET ME Click To Tweet

Never miss an article or video!

Get notified of every new article or video we publish, when we publish it.

Mike Clayton

About the Author...

Dr Mike Clayton is one of the most successful and in-demand project management trainers in the UK. He is author of 14 best-selling books, including four about project management. He is also a prolific blogger and contributor to ProjectManager.com and Project, the journal of the Association for Project Management. Between 1990 and 2002, Mike was a successful project manager, leading large project teams and delivering complex projects. In 2016, Mike launched OnlinePMCourses.
{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Never miss an article or video!

 Get notified of every new article or video we publish, when we publish it.