Scope Definition and Control
There has been considerable alarm in the business community over industrial project cost overruns in recent years. What are the causes? The Business Roundtable Construction Industry Cost Effectiveness (CICE) Project Report A-6 states that “Poor scope definition at the estimate (budget) stage and loss of control of project scope rank as the most frequent contributing factors to cost overruns.” A recent report found that some construction industry officials consider lack of scope definition to be the most serious problem on construction projects.
While inadequate definition may be attributable to poor planning and management of projects, it must be assumed that there can be circumstances which either preclude full scoping of projects or force managers to proceed at a level of scope definition less than desirable. Regardless of the reasons, when there is poor scope definition, final project costs can be expected to be higher because of the inevitable changes which disrupt project rhythm, cause rework, increase project time, and lower the productivity and morale of the work force.
Cost overruns on industrial projects can be both apparent and real. Most overruns are calculated by comparing final costs with budgeted costs. If the budgeted costs are not based on a well-defined scope, they are probably low and not a valid base for comparison. Real overruns occur as a consequence of unjustified scope growth during engineering, other engineering changes, and a variety of engineering, procurement, and construction inefficiencies. However, the inescapable conclusion is that scope definition and control is a key factor in both apparent and real cost overruns.
This publication will explore this subject and attempt to answer these questions:
- Why is scope definition a problem?
- Why is scope growth a problem?
- What can industry do to control these problems?
