business contingency plan

AVOID THESE CONTINGENCY PLANNING MISTAKES

Developing and working with contingency plans is a routine part of project management. Additional funds, alternate material or equipment options, revised workflows, and shifted timeframes may all be part of contingency planning efforts, and a well-crafted plan can enable a project team to be extremely nimble while ensuring the project’s success.

Though contingency plans offer crucial support when issues arise, project teams sometimes overlook important factors in developing them—or sticking to them. Pressure from leadership and abbreviated planning cycles are just two of the reasons PMPs may not give contingency planning efforts the attention or commitment they deserve. If your project management team has run into problems in the past, consider if you’ve been pushed into making any of these contingency planning mistakes.

Failing to include vendors in project negotiations. Many contingency plans revolve around vendor-related activities, but incorporating that data into the project’s lifecycle is sometimes done without sufficient vendor input. Whether it’s a local service provider or an equipment manufacturer in another state, any outside partner whose project involvement could be affected by—or contribute to—contingency planning efforts should be consulted early in the process. If additional funds may be necessary, work with the vendor to create a realistic estimate. The same holds true if timeframes could potentially be impacted. Remember, though, to include in the project’s files all documentation detailing how contingent estimates were calculated.

Failing to make clear which funds are for contingency plans. It can be confusing for those outside the project office to identify the portions of the budget that are for contingency items as opposed to those that are not. The most common problem caused by this lack of clarity comes when organizations allocate funding for future projects. Teams that regularly bring projects in under budget—sometimes meaning their contingency funds weren’t spent—may have difficulty justifying contingency line items in the future. This could be a significant stumbling block if the team isn’t proactive about contacting the leadership team to explain the situation and secure the necessary line items for other projects in the pipeline.

business contingency plan

Treating contingency plans as a necessary evil rather than a meaningful way to ensure the project has sufficient support. Some PMPs include contingent funds in their budget planning out of habit rather than in response to a recognized need. There’s little if any discussion among the team about what kind of funding or other contingencies may be appropriate, and the function that contingency planning should play is largely glossed over to save time. Too often this results in contingency plans that are unworkable, that don’t address those needs the project is likely to encounter, that inadvertently duplicate other portions of the project plan, or that aren’t communicated to the rest of the team (potentially leaving resources unused even if when they’re needed).

Agreeing to eliminate contingent funds in order to meet a desired budget number. It’s an age-old move many project management teams have fallen prey to over the years, but it usually causes more problems than it solves. The scenario is probably familiar to many: the proposed budget for the project is higher than the organization can bear, and one of the executives pressures the project team to cut costs without reducing the scope. What’s the first thing to go? Rather than conducting a thoughtful evaluation of the project in its entirety, PMOs sometimes resort to chopping all available contingency line items, which may seem like lower-hanging fruit than anything else. It’s self-defeating, as the team will have a lot to answer for if they need to explain cost overruns to this same miserly leadership team later.

Project management training tips provided by PMAlliance Inc.

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