Negotiating Additional Budget For A Project – What To Know

by | Nov 4, 2021 | Project Assurance

Of all the duties a project manager or owner goes through in their career, asking for more budget is arguably the most daunting. When more project funds are required beyond the initial figure, it’s only natural for those involved to question why. With that said, additional budget is often required due to evolving business requirements or unforeseen circumstances. Ideally a budget increase is borne from an external factor beyond the project delivery team as this can make for a simpler business case. If the budget overruns are due to something related to the project team, it’s important to have identified exactly why this has happened to ensure the case is fully considered.

In this article we’ll provide some insight into the process of getting additional budget, offering organisations, project managers, stakeholders and steering committees some food for thought.

More budget requires a compelling business case

Requesting more budget for a project needs to be formulated as a mini-business case on its own, as would have been done for the project in the first place. A formal change request is often the mechanism used but it performs the same function. A business case provides the decision-makers with all the required background and context behind a request, offering a detailed outline of the benefits and rationale of proceeding with what’s been proposed. While a change request for additional budget may not need to go into quite the same degree of detail broadly around a project, you should approach the process requesting more budget with the same level of rigour around considerations.
Bear in mind – if this process is about opening up more budget, the business will naturally need to scrutinise why this is required in the first place, and whether there were issues with the initial business case or scoping that has led to a budget overrun.

Sometimes additional budget will be a natural by-product of a business expanding its requirements of a project – in these scenarios the change request may not require as much in depth information if a board or leadership team has ostensibly approved the budget already and is looking merely for a formal document to capture the requirements. But in other cases the request for additional budget comes from an operational and delivery level, due to unforeseen challenges with resourcing or scope issues. In these situations, the change request will need to pose a much more compelling argument; you may be coming up against resistance.

Other options should be explored or exhausted first

Before requesting an additional budget from the business, a project steering committee should explore any other potential ways forward. If the budget is forecasted to go over within 6-12 months based on progress vs. spend, then it may be prudent to audit a number of project elements, including:

  • What deliverables are still to be provided?
  • Are there any resources that having on board would make delivery more efficient?
  • Have we explored different ways to deliver similar functionality at reduced time investment – e.g. are there ‘out of the box’ solutions that are cheaper/faster to implement?
  • Can certain deliverables be deprioritised instead of increasing the budget?
  • Are some scoped items of the project still even relevant – i.e. can they be scrapped altogether?

This process is vital to do before requests for more budget. Part of what good independent quality assurance offers is this review of all components of the project to identify ways to proceed that may not demand additional spend.

IQANZ blog - Talking to key delivery personnel

Talking to key delivery personnel about requirements

To properly understand whether or not, or how much, extra budget is needed, project teams need to be consulted. Whether you’re a senior leader, on the steering committee, the PM or otherwise, chatting to the people who are delivering the work to understand exactly where the overrun might occur is a critical step. Businesses should harness the technical knowledge within a project delivery team along with their project progress reporting and governance to build a clear picture of the gap existing between forecasted capacity and outstanding business objectives. You may discover that some functionality is not necessarily as time-consuming as initially thought – perhaps the time assigned to some deliverables can reduce so it can increase for others that may not have been fully scoped correctly. Where businesses sometimes go wrong is trying to make the decisions around budget increases without involving those who are actually directly influencing the rate at which that budget is being spent. Understanding how the project team is functioning and where the issues lie is a great first step to working out what additional budget is required.

Challenging assumptions about work required

This leads nicely into our next piece of advice, which is don’t make assumptions on remaining work without carefully scrutinising the project plan and team members’ approach. This part of the process is often perfect for an external project QA specialist like IQANZ as we’re able to apply proven project review methodologies to identify where the business could regain time by adjusting its approach. It can be very difficult to apply a fresh lens to a project when working internally in the organisation. Using independent quality assurance brings expertise without any bias, allowing the business to progress in the most logical way possible.

Preparing for push back from steering committee or leadership team

Submitting a request for a new budget is rarely a quick one and done process. Any capital expenditure will need to go through numerous sets of consideration stages. The project steering committee may not be the ones ultimately signing off the budget, but should definitely be working together to make any change request as tight as it can be before it hits the leadership team. A leadership team who may very well be the sign off point (or with the board for large amounts), will also be asking the hard questions around why, how and when. The more preparation done at the start of the process – building the change request, consulting with the team and vendors – the less back and forth required as the request is reviewed.

Making sure new budget adequately covers project delivery to completion

While getting an additional budget for a project can be a tough process, having to do it multiple times can provide a real strain on stakeholder confidence and may even result in project failure if the additional budget is simply not available.

For this reason, the request for an increased budget should cover all foreseeable costs through to the end of the project or phase. It may be an idea to build in a contingency budget as an extra layer of safety.

This may also necessitate a longer rescoping process where BAs and other personnel help to build the clearest picture possible of what’s required.

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Optimising other parts of the project

Is more money really the only answer? It might be required to an extent, but in our experience a project delivering on time and to budget comes through a number of other areas that can be improved:

  • Governance – are the fundamental mechanics around how the project is run, organised and reported on in place and operating effectively?
  • Clarity of scope – is the current scope too vague for the organisation to properly deliver to? Can the deliverables be redefined to assist delivery?
  • Personnel – do you have the right people in the right positions to deliver? Are parts of the team stretched and others without enough work?
  • Vendors and technologies – is the project getting the best value from the platforms, systems and vendors that are involved in delivering the solution? Does the organisation itself need to absorb extra costs or are the overruns the responsibility of an external vendor?

There are far more areas to assess alongside the budget – our team can help identify these areas for you and guide you through the process.

Want more guidance around project budgets?

IQANZ helps organisations deliver successful projects. The budget is a core piece of the puzzle. We’re able to help identify the issues within a project and provide guidance around delivering to budget Get in touch with us now to arrange a free initial meeting about your project.

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