Are Project Managers Expensive?.

External Project Managers Are Expensive. Why Shouldn't We Save Money By Keeping Project Management In-House?

All too often, organisations pass the project management function to an existing staff member whose role within the company is something else entirely, who therefore lacks the relevant skills and qualifications in the area of project management. They take the project management role because that’s what their boss told them to do.

This is the highway to project failure, blowouts, and delays.

Although project managers can be expensive, they are far from a luxury service. If a project manager is good at their job, they should save the client the money that is spent on engaging them. If they are really good at their job, they will save the client significantly more. By optimising the products used for the project, negotiating all the contracts, and preventing disputes, the savings quickly mount up, and the headaches that the client has to deal with are significantly reduced.
Some of the cost savings are things that the client may never even be aware of. By ensuring the client doesn’t run into problems and pitfalls that can create enormous expense, a good project manager averts disaster that the client will remain oblivious to.

Are You Really Saving Money?

A useful comparison to draw in relation to cost savings are buyer’s agents. In Australia, buyer’s agents are rarely used, whereas in the US they are almost universally engaged as part of the process of selling a home. The prospective purchasers will use a buyer’s agent and the sellers will use a standard real estate agent.
The function of the buyer’s agent is to get the buyer a better deal than if they had tried to manage the process by themselves. As buyers are unlikely to have much experience with purchasing property, they often lack the capability to negotiate a good price. This means the savings are substantial enough that engaging a buyer’s agent and paying a fee for their services makes more economic sense than relying on the real estate agent.

Project management is very similar. With an experienced external project manager on your side, with a clear understanding of what you’re trying to do from a delivery cost risk perspective, you will be in a far better position than if you were to try and manage the project in-house, using someone who lacks the requisite skills.
Essentially, project managers represent their client’s interests in every decision that needs to be made.

Planning Equals Protection

It’s never advisable to just march into the jungle, hacking away at the undergrowth and hoping you’ll come out at the right place on the other side. You need to make sure you’ve looked at the terrain, planned the route, and have all the necessary tools and supplies for the journey.

Although it is the project manager who will be kicking everyone’s butt to go fast once the project is underway, everything needs to go through meticulous planning before getting to that stage.

During the planning stage, everyone else will want to get going, and the project manager will be the one reining things in. This is because big construction projects involve a great deal of money, which means there’s a lot at stake. You want to get it right. One example of how this works is the contract.

If your organisation needs to expand and requires new buildings in order to achieve this expansion, you go to the builder, agree to their price, and then sign the contract. Great. Now the project can begin!

But who wrote the contract? You or the builder? In the majority of cases, the builder gives the client the contract. After all, the client has never done any building work before, so how are they even meant to know what should go into a construction contract? It’s worth thinking about that for a moment: clients don’t even know what should go into a construction contract.

If you’re the one spending all the money, then the rules of the game need to come from you because it’s your money. By bringing a project manager on board, the contract will be derived from the client and then given to the contractor for them to accept.

Although it may take a little extra time initially, the protection given by a contract drawn up by a project manager is worth the extra time. In the longer term, it is significantly better to know you are protected, rather than simply trusting that the builder has drawn up a fair contract that meets your requirements and signing on the dotted line.
Contracts that do not serve the needs of the client are one of the main reasons why the construction industry is so full of legal disputes—because clients don’t understand what they’re getting themselves into. Engaging a project manager from the project’s outset is never going to be as expensive as running a full-blown legal case once things have gone wrong and you discover your contract doesn’t protect you.

By ensuring your project has gone through a rigorous planning process, and you have as much protection as possible, the likelihood that everything will run smoothly is far greater—and the costs are almost certainly going to be kept far lower in the long run.

Key Takeaways

  • If a project manager is good at their job, clients will almost certainly save the money that is spent on engaging their services.
  • If you’re the one spending all the money, then the rules of the game need to come from you. Your project manager represents your interests in every decision that needs to be made.
  • Planning equals protection. By making sure you have got things right in the planning stage, you can save yourself headaches, time, and significant amounts of money in the long term.