“We cannot afford to terminate the project now. We have already spent more than

Question

“We cannot afford to terminate the project now. We have already spent more than 50% of the project budget.” How do you react to this statement? Do you agree or disagree? Give reasons for your answer. Will you never terminate the project when more than 50% of the budget has been invested into the project? Under what circumstances would you agree to terminate the project and take the loss of 50% of the project budget? Does the number 50% have any relevance to your decision? What factors would you take into account in making your decision? If possible, give examples from real projects. Write your detailed comments on the statement in the light of these questions and what you have learned in this topic.

Explanation / Answer

There is usually a requirement for tracking for a 100 percent cost overrun when there is 50 percent of project budget involved or more to cancel it. It would only make sense to cancel it then. When more money is spent then the breakeven point keeps increasing and there is more money involved. There is a fear of losing the value of the project with the involvement of the cost with no anticipated return. The projects are rarely cancelled to avoid destroying the value of the project. Thus there is increased risk and greater concern to decide the factors required to motivate the team and contractors and lessen the degree of overrun. If there seems to be a clear allocation of an experienced project manager and the project looks like it will be at the greater loss by completing it rather than terminating it; then under such rare circumstances, there will be the decision taken to terminate the project. The major factor of risk avoidance makes early termination difficult. There is also the possibility of absence of risk acceptance which revolves around the ignorant attitude towards the situation of the project. The terrible situation of the project is avoided to ignore the risk associated with completion of the project. This is only to avoid the termination. When there are risk acceptance and exposure of risk then there is early termination involved in spite of spending fifty percent to avoid the project getting dommed after the completion. Barry Boehm, 2000 stated that it takes a lot of adjustment to understand that terminating a project cannot be necessarily a bad idea but instead healthy and natural. The idea of viewing termination as the failure of a project also leads to avoidance of project termination.

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