Running head: CONTROLLING RISKS AND PROJECT BUDGETS 1
Controlling Risks and Project Budgets
The updates are that the initial $1 million budget allocation for the EDIS project has been reduced to $750, 000. However, this change is not a threat to progress since a good project manager is always prepared to perform cost containment to maintain the achievement of project objectives. The reduction requires immediate changes to the current budget of $988,410.00. This new $750,000 allocation means EDIS budget has a deficit of $238,410 ($750,000 – 988,410). As a result, critical adjustments on EDIS's current budget are necessary to ensure successful implementation. As a project manager, I should prepare my team members to work within a new budget that is going to be proposed while maintaining their excellent initial performance (Yang & Chen, 2015). However, I will not make any changes relating to labor to avoid the unexpected exit of team members or losing critical skills such as IT specialists. In regard, I will make changes to other elements in the budget to counter and balance the budget reduction impact.
Expenses involving the purchase of computers, installation materials, furnishing, and renovation are the ones to balance and align the budget to the current $750,000. I am going to reduce the purchase of 100 computers to 80 to spend $64,000.000 instead of the original $80,000. Renovation budget of the emergence room will be cut from $311,120.000 to $245,000.000 while furnishing cost be adjusted to $200,000.000. from $298,000.000. Since these reductions total $180,120, they still have not cushioned $238,410 deficit. I will explore other areas of adjustment, and in this case, I will negotiate with FQT Project Management Consultancy Company to cut his price of $150,950.00 to $100,950.00. Further, I will seek to reduce working hours for IT experts from 10hrs./day to 7 hours, but retain hourly payments and days. This adjustment will save $9,450 in 35 days they are required to work. Upon the completion of these vital changes, the proposed budget will read less than the newly allocated $750,000. Below are the initial EDIS budget and a recently proposed budget that is aligned with $750,000 allocation;
Initial EDIS Budget with $1 Million
Project Manager’s Salary
(10hrs./day x 60days) @$100/hr. = $60,000.00
Salary for IT Specialist
(10hrs./day x 35 days) @$90/hr. = $31,500.00
FQT Project Management Consultancy Firm
$150,950.00
Allowances for Nurses
(10hrs./day x 60 days) @$50/hr. = $30,000.00
Purchase of Computers and Laptops
100 desktops (Dell OptiPlex 3070 Desktop Computer - Intel Core i5-9500 - 8GB RAM - 256GB SSD) @$800.00 = $80,000.00
10 laptops (Apple 13.3" MacBook Pro with Retina Display (Mid 2020, Space Gray) @$2450=$24,500.00
Installation of Wireless Computer Network (labor + material costs)
Cost Breakdown: Materials: Cat-5 cables (150 ft. Ethernet cable, @$2/ft. Cat-6 cables (200 ft. cable @$30/ft.). A Netgear modem 5@$100 and an Apple modem 3@$200. Material total cost $2,000. Labor: Electricians $85/hr. for 4hrs.= $340
=2000+ 340= $2,340
Renovation of the Emergence Room
$311,120.000
Furnishing
$298,000.000
Total Cost:
$988.410.00
Proposed EDIS Budget with $750, 000
Project Manager’s Salary
(10hrs./day x 60days) @$100/hr. = $60,000.00
Salary for IT Specialist
(7hrs./day x 35 days) @$90/hr. = 22,050.00
FQT Project Management Consultancy Firm
Paid $100,950.00
Allowances for Nurses
(10hrs./day x 60 days) @$50/hr. = $30,000.00
Purchase of Computers and Laptops
80 desktops (Dell OptiPlex 3070 Desktop Computer - Intel Core i5-9500 - 8GB RAM - 256GB SSD) @$800.00 = $64,000.00
10 laptops (Apple 13.3" MacBook Pro with Retina Display (Mid 2020, Space Gray) @$2450=$24,500.00
Installation of Wireless Computer Network (labor + material costs)
Cost Breakdown: Materials: Cat-5 cables (150 ft. Ethernet cable, @$2/ft. Cat-6 cables (200 ft. cable @$30/ft.). A Netgear modem 5@$100 and an Apple modem 3@$200. Material total cost $2,000. Labor: Electricians $85/hr. for 4hrs.= $340
=2000+ 340= $2,340
Renovation of the Emergence Room
$245,000.000
Furnishing
$200,000.000
Total Cost:
$748,840
References
Yang, J. B., & Chen, C. C. (2015). Causes of budget changes in building construction projects: An empirical study in Taiwan. The Engineering Economist, 60(1), 1-21.