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You provide a project cost estimate for the project to the project sponsor. He is unhappy with the estimate, because he thinks the price should be lower. He asks you to cut 15% of the project estimate. What should you do?
a) Start the project and constantly look for cost savings
b) Tell the team members to cut 15% from their estimates
c) Inform the sponsor of the activities to be cut
d) Add additional resources with low hourly ratesThe correct answer is C.
This question is full of choices that are not correct project management actions. If you picked the wrong answer, look again at the choices and try to determine what you are missing. Whatever it is, it will show up more than once on the real exam!
To answer the question, you must first realize that it is never appropriate for a project manager to just cut estimates across the board (choice B). The project manager should have created an estimate with realistic work package estimates that do not include padding. Then, if costs must be decreased, the project manager can look to cut quality, decrease risk, cut scope, or use cheaper resources (and at the same time closely monitoring the impact of changes on the project schedule).
One of the worst things a project manager can do is to start a project knowing that the time or cost for the project is unrealistic. Therefore, choice A cannot be best. Notice that choice D suggests adding additional resources. That would cost more. Choice C involves evaluating, looking for alternatives, and then going to the sponsor to tell him the impact of the cost cutting.Revise Cost Management Concepts: Project Cost Management
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