HARYANA SCHOOL OF BUSINESS

GJUS&T, HISAR

PROBLEM OF TIME & COST OVERRUN

P R E S E N T E D TO : P R E S E N T E D B Y:
DR. KOMAL DHANDA S E E M A K H YA L I A
200101010070
MBA GEN’B’
What is a Project?
•A project is a set of tasks which must be completed in order to arrive at a particular
goal or outcome. 
•According to the Project Management Institute ( PMI ), the term Project refers to
” to any temporary endeavor with a definite beginning and end”.
•Every project should have a well-defined objective.
•A project is temporary.
•A project has a definite beginning and a definite end.
•A project requires resources.
•Resources include people, hardware, software, or other assets.
Time overrun 
•It is the phenomenon in which the project gets delayed beyond its expected completion
time due to certain difficulties i.e. more time is required to finish the project than initially
planned.
•Late completion and late delivery
Cost overrun 
•It is the phenomenon in which the client/contractor has to spend more money for the
completion of the project than that originally estimated i.e. the project goes over budget.
•Cost Overruns are the additional percentage or dollar amount by which actual costs
exceed estimates.
•Cost control during design.
•Cost control during construction.
TIME OVERRUN CAUSES
•Plans, specifications etc are not received by the contractor in time.
•Adequate resources are not available on the site.
•Inadequate technical and financial management.
•Extra work has to be carried out.
•Unforeseen problems like adverse weather, natural calamities etc
•Wrong or faulty initial planning.
•Accident on site.
Project Time Management
•Project Time Management – The process required to ensure timely completion of a
project
•For project managers, time is the least forgiving, and least flexible variable in the project.
Time cannot be stopped, no matter what changes have been requested, what resource
conflicts are occurring, or what problems have been encountered.
•As a result, project time management is:
Considered one of the most difficult tasks to both improve and successfully
achieve.
Considered critically important in determining the overall success of a project.
 Shortening Project Schedules
•Crashing – (Expert or Full Time) when we shorten the
duration of project by reducing the time of one or more
tasks by increasing the resources which helps make
tasks take less time than what they were planned for.
•Fast Tracking – Parallel is another technique used to
shorten a project schedule, and involves performing
project tasks in parallel.
Program Evaluation and Review
Technique (PERT)
•A technique used to estimate project duration when there is a high degree of uncertainty
about individual activity duration estimates. PERT uses probabilistic time estimates,
which are duration estimates using optimistic, most likely, and pessimistic task duration
estimates instead of specific or defined estimates.
•The PERT analysis method is based on a project network diagram, normally the PDM
method, and a weighted average for each project task is calculated using the following
formula:
optimistic time + (4 x most likely time) + pessimistic time=PERT weighted average
Estimates and cost overruns
A large number of studies show the fact that cost overrun affects projects in all
industries, in all countries either in the public or in the private sector
Cost Overrun = Actual Cost – Estimated Cost
The problem is that several cost estimates are usually produced during the project life
cycle, but there is no standard rule to determine which one must be considered for
computing the cost overrun.
COST OVERRUN CAUSES
•If the contractor does not have proper technical knowledge of the jobs, cost overrun is
possible.
•If the original bid by the contractor is lower than actual project cost, cost overrun is possible
•Increase in cost of materials and labour. This is more significant in long duration projects.
•Improper management and wastage of available resources.
•Adverse weather conditions and natural calamities can damage to existing work, leading to
rework and increase in cost.
•Extra items of work done.
In India of 617 infrastructure projects, only 149 were faced with cost overruns
amounting to 22.2% with respect to the latest approved estimates
Corrective measures to avoid cost
over run
•Pay a lot of attention to project planning.
•Check a contractor capabilities before hiring.
•Attempt to stay within the scope that was originally planned.
•Use good scheduling tools and techniques.
 Methods to control Overruns:
•Identification of the overrun
•Procurement cost control
•Negotiation with the vendor
•Sourcing the materials
•Optimum utilization of resources
•Reduction in wastage
•Improvement in the method
•Increase the speed of construction
•Stock reduction
•Right sizing of the project team.
References
Projects by Prasanna Chandra
Projects management by K Nagarajan
www.google.com
www.slideshare.net
THANK YOU