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What are the most important cost drivers for your program budget?

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As a program manager, you need to plan, monitor, and control your program budget effectively. But how do you identify and manage the most important cost drivers that affect your program performance and outcomes? In this article, we will discuss six key factors that influence your program budget and how you can address them.

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Sriram Gonella

Strategic Director | Digital Transformation & Agile Specialist | AI/ML, Snowflake Expertise | IIM Kozhikode SMP |…
Phillipe Luna

Program Manager | Building & Scaling Tech Communities | Event Management Expert | Advocating for DEI ?????
Kailash Upadhyay - PMI(PfMP, PgMP, PMP, ACP, RMP) Microsoft(MCP, MCT), IIBA(CBAP)

??Author of Excelling Program Management | ???Host of P3M Knowledge Series Podcast | Contributor to PMI's 5th edition…

1 Scope and complexity

The scope and complexity of your program determine the amount and type of resources, activities, and deliverables that you need to execute your program successfully. The more ambitious and challenging your program goals are, the more likely you will incur higher costs and risks. To avoid scope creep and unrealistic expectations, you should define your program scope clearly, align it with your stakeholders' needs and priorities, and break it down into manageable components.

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Sriram Gonella

Strategic Director | Digital Transformation & Agile Specialist | AI/ML, Snowflake Expertise | IIM Kozhikode SMP | Managing Large-Scale Projects and Diverse Teams
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Scope and Schedule are always the major contributers for a Program budget in addtion this also adds with skills, dependencies, complexity further

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Phillipe Luna

Program Manager | Building & Scaling Tech Communities | Event Management Expert | Advocating for DEI ?????
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Program budget drivers hinge significantly on scope and complexity. Clearly define and align your program scope with stakeholder needs, preventing scope creep. Balancing ambition with realistic expectations ensures efficient resource allocation, minimizing costs and risks.

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Pothamsetty K

TPM @ Olam | Global Program Management | Agile Specialist - CSM, CSPO | ITIL V4
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Scope and complexity include project size, with larger projects requiring more resources, and complexity, encompassing technical, organizational, and regulatory aspects. Scope changes and scope creep often lead to increased costs due to rework and extended timelines. High complexity demands specialized skills and robust management, further elevating expenses. Understanding these drivers is crucial for effective budgeting and resource allocation.

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Kailash Upadhyay - PMI(PfMP, PgMP, PMP, ACP, RMP) Microsoft(MCP, MCT), IIBA(CBAP)

??Author of Excelling Program Management | ???Host of P3M Knowledge Series Podcast | Contributor to PMI's 5th edition SPM | Mentoring the Future Program & Portfolio Leaders
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As per my experience, the most significant cost drivers for a program budget are intricately linked to the components that define the program's scope and complexity. These components typically include individual projects, subsidiary programs, and various program activities. In practice, a substantial portion of the program budget is primarily influenced by the cost implications of these components, rather than being driven solely by program management efforts.

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Kemal Atik
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Complexity from different aspects technical,?organizational,?and regulatory with multiple stakeholders require specialized skills and sophisticated management ,?that can drive up costs to higher levels. That's why if possible avoid from complexity with phased approach without single big contract. Scope creep is also easier to occur when the complexity exists that inflate costs due to rework and delays.

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2 Schedule and dependencies

The schedule and dependencies of your program affect your program budget by influencing the duration, sequence, and coordination of your program tasks and milestones. The longer and more interdependent your program is, the more likely you will face delays, disruptions, and rework that increase your costs and reduce your efficiency. To optimize your program schedule and dependencies, you should estimate your program duration realistically, identify and manage your critical path and dependencies, and use agile and adaptive methods to respond to changes.

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3 Quality and standards

The quality and standards of your program impact your program budget by affecting the level of performance, compliance, and satisfaction that you need to achieve and maintain for your program deliverables and outcomes. The higher and stricter your quality and standards are, the more likely you will need to invest more time, money, and effort to meet them. To balance your quality and standards with your program budget, you should define your quality criteria and metrics, implement quality assurance and control processes, and apply continuous improvement practices.

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Kailash Upadhyay - PMI(PfMP, PgMP, PMP, ACP, RMP) Microsoft(MCP, MCT), IIBA(CBAP)

??Author of Excelling Program Management | ???Host of P3M Knowledge Series Podcast | Contributor to PMI's 5th edition SPM | Mentoring the Future Program & Portfolio Leaders
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As per my experience, quality management costs stand out as a critical element within the broader program budget. These costs play a pivotal role in ensuring that the program solution not only meets but exceeds expectations, ultimately contributing to the successful delivery of program benefits. When we delve into quality management costs, they can be categorized into two main components: cost-of-conformance and cost of nonconformance. Cost-of-conformance involves proactive measures to ensure quality, and it comprises prevention costs and appraisal costs. Cost of nonconformance, meanwhile, encompasses the expenses incurred when the program fails to meet quality expectations. This includes costs related to rework, warranty claims, etc.

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4 Resources and skills

The resources and skills of your program influence your program budget by determining the availability, capability, and cost of your program team, equipment, materials, and other inputs that you need to complete your program work. The scarcer and more specialized your resources and skills are, the more likely you will have to pay more or compromise on quality or schedule to acquire them. To manage your resources and skills effectively, you should plan your resource requirements and allocation, develop your team's skills and competencies, and leverage external sources and partnerships.

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5 Risks and uncertainties

The risks and uncertainties of your program affect your program budget by creating potential threats and opportunities that may change your program assumptions, constraints, and variables. The more uncertain and volatile your program environment is, the more likely you will encounter unexpected events and changes that may increase or decrease your costs. To mitigate your risks and uncertainties, you should identify and assess your risk sources and impacts, implement risk response and contingency plans, and monitor and review your risk status and performance.

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Pothamsetty K

TPM @ Olam | Global Program Management | Agile Specialist - CSM, CSPO | ITIL V4
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unforeseen risks like market changes or project delays, leading to increased costs. Risk mitigation strategies also require resources. Market volatility can affect material and labor costs, and regulatory changes may necessitate additional compliance expenses. Estimation inaccuracies due to uncertainties can result in budget overruns.

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6 Stakeholders and communication

The stakeholders and communication of your program impact your program budget by influencing the level of engagement, collaboration, and feedback that you need to establish and maintain with your internal and external parties involved in or affected by your program. The more diverse and complex your stakeholder network is, the more likely you will need to spend more time, money, and energy to communicate effectively and manage expectations and conflicts. To improve your stakeholders and communication, you should analyze your stakeholder interests and influence, develop your communication strategy and plan, and use appropriate communication tools and channels.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Kemal Atik
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Resource costs and external factors are mostly drive costs to up as significant drivers. Personel, material, equipment and facility costs can vary depending on the program activities and duration. Avoid overallocating any of resource to go ahead of schedule without balancing the your budget and cash flow. Vendor, regulatory costs and economical conditions can hit the project budget if things are not well planned. Initiate proposal collection as earliest as possible with multiple options and invest market insight data acquisition if they are not readily available.

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Jason Hale

Facilis somnus, auxilium adest.
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I believe one topic of constraint worth addressing with this article is the holding cost and supply chain / logistics as we exit quasi-post-apocalyptic economies of 2019-2022. We learned just how quickly JIT in a "global" market, with diminished silos can turn catastrophic and stay that way for a good long time. Lockstep with section 5 regarding risk, and 6 regarding managing expectation; considerations for a higher percentage front-load and staggered frontloaded expenditures whereas, addressing material strategically is most definitely ~"worth the squeeze" so to speak. - Jason Hale, SPC&P

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What are the most important cost drivers for your program budget?

1

2

3

4

5

6

7

1 Scope and complexity

2 Schedule and dependencies

3 Quality and standards

4 Resources and skills

5 Risks and uncertainties

6 Stakeholders and communication

7 Here’s what else to consider

Program Management

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What are the most important cost drivers for your program budget?

1

2

3

4

5

6

7

1 Scope and complexity

2 Schedule and dependencies

3 Quality and standards

4 Resources and skills

5 Risks and uncertainties

6 Stakeholders and communication

7 Here’s what else to consider

Program Management

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