The author's leading premise is that cost containment is more important for Project A than for Project B. This is almost axiomatic if you do the math.
Purpose of Project Controls
Project controls are the processes and procedures used to keep a project within acceptable variance of the project's goals, especially in the area of projected cost vs. expected return on investment (ROI).
Project Controls and the Article
- Project A will eventually cost about a million dollars and produce value of around $1.1 million.
- Project B will eventually cost about a million dollars and produce value of more than $50 million.
What this tells you is that Project A has an expected return of $0.1 million after accounting for project expenses. On the other hand, Project B has an expected return of $49 million, earning out more than 50 times its total budget. As one of the stars of Breaking Bad might say, "That's a lot of cheddar!"
What’s immediately apparent is that control is really important for Project A but almost not at all important for Project B.
Project A has a profit margin of only $100,000. The planned budget will eat up almost all of the profits, so it will not tolerate much in the way of schedule slippage or cost overruns before the project is in the red.
Project B, on the other hand, has a much bigger profit margin, and therefore a bigger margin for error. In fact, the cost of the project is only 2% of the expected profits, so the project could theoretically balloon out of control (for example, it might have labor estimates running 300% over budget) and still make the guys from Breaking Bad plenty of "fat stacks."