A lot of project work is bid and won competitively, in effect beating out the other project team that wants the work.
But, how do you win? How about this:
Bid the job with only a 70% confidence that you can do the job for the price... thereby taking a 30% risk that the actual cost will be higher (How much higher? You probably don't know).Ok, sometimes that's what it takes to win; I get it. But then, if you win, you might be heard saying: "OMG, what do we do now?"
But the worst is when the sponsoring executive says: Congratulations! Now, do the job for 90-10!
Translation: "Give me a project plan that brings the cost in for less than 10% risk that it will be higher than bid." (How much less: it probably doesn't really matter ... except: your bonus -- and perhaps your job -- only depends on not overrunning the cost)
Now with this scenario, we have the classic "project balance sheet" case:
- Sponsor's side of the balance sheet, top down: 90-10 cost confidence required of the PM
- PM's side of the balance sheet bottom up: 70-30 on cost; so the only way to obtain balance is to take a risk.
And, in the best traditions of risk manage, "taking a risk" doesn't mean listing it on a register and then just standing around looking at it. Taking a risk means: Do something to defeat the forecast! That's the project manager's mission:
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