Pre-Agreed Time Booking
Time booking is probably the most common abuse of project financials.
It goes like this.
Whether we have resources working on projects (and this is the case for 100% of projects) the key principle is that they do book time spend on executing it.
To measure the real effort vs planned effort and cost booking time has to be regular and accurate.
Frequency of time booking is a topic in itself, but most standards oscillate between daily and weekly.
But we know to make discipline od time booking within the standard is a challenge on a project.
But the real plague is to pre-agree time to be booked on a project vs real time spent.
Project managers are often measured on the accuracy of execution versus budgeted cost.
As a result, they come to an agreement with individual resources or suppliers on how much time should be booked in a given week. Of course regardless of real effort spent.
This way Time and Material type of work become Fixed price work and it is always billed as in the original plan.
Is this wrong?
Well, quite often most of the people concerned are happy with this arrangement.
But it does not provide the right picture what is the real cost of the project.
It sometimes pops up when an individual resource is working overtime and for some reason is not compensated for this.
All records show he/she worked 7-8 hours per day. And this is where the issue starts.
Wrong Resources to Cost Rates
This case has two main subcases.
The first one may often start in the initiation phase.
I remember the project during planning, assumed a significant portion of resources to be offshore to get the right cost structure.
Well, it was manipulation and the local project manager knew the customer will not allow remote access to their system. In this case when execution came, no single offshore could be used, but it was either local with a significantly higher rate or that offshore resource but brought on site.
It was all clear at the front but silenced on purpose (to get budget approval?) when planning staffing.
The result was, the real project cost was much higher than planned.
"The real plague is to pre-agree time to be booked on a project vs real time spent "
The other case is when a resource or resources are leaving the project and we have to backfill the gap
We do so, but not with similar competence/skills levels, but more expensive ones as they are available right away.
It is not always fraud per se, but often business decisions to manage bench in a company. However, from a project perspective, this is a screwing cost plan.
And with many project examples I have seen in my life, there was no single one that officially processed this as a change to the budget.
More, this decision was often explained as a more experienced person will deliver faster, so overall it should not impact the project budget.
It is a lie of course.
While a more experienced person can deliver faster and better quality, we all know there are limitations to this concept which makes any benefit very short living.
Risk Buffer Misuse
This one is also quite frequently seen on projects.
The project has a financial risk buffer defined. There is a process to execute it.
Then whenever there is a scope change it is financed from a risk buffer.
Why? Somebody may ask. Because this is easier and faster than executing change on the customer side. It is a shortcut for project managers.
I am not saying that risk buffer can not be used for covering scope change, but before this, all change request processes between parties should be exhausted.
There is even worst misuse of risk buffer.
Imaging project which reports all green parameters, but in reality, is not green, neither financially.
When a true picture comes to the surface the expected cost is higher than the planned cost and risk buffer together.
This is a moment risk buffer is gone as everybody understands the project is underwater.
Certainly, risk buffer and process to execute it are not needed anymore. And funny enough never used at the same time.
These are just 3 main examples that a most common from my practice.
There are more frauds or misuses of the financial management of a project.
All lead to wrong information what is the real cost of the project.
As consequence, it costs more the delivery company and customer at the end of delivery.
Keeping tight, honest, regular, and transparent financial management is a critical component of project management.
It starts with a solid baseline estimation and pricing. This is where Pricell.io can help greatly!