Project Management: Financial Control Issues Accounting, Finance Essay

Project Management: Financial Control Issues
Name
Institutional Affiliation
Project Management: Financial Control Issues
Project Management is a concept that spans different disciplines, but the goal remains the same: to meet the expectations of the client through the provision of quality deliverables. However, due to changes that arise in the process of working, project managers face challenges that impact the quality of the work they do. To solve these challenges, project managers have to use project control and monitoring techniques. This paper introduces the concept of work breakdown structure as a technique for solving problems affecting Redstar Construction Company.
The Project Management Institute PMI (2017) defines a project as an endeavor that is undertaken to create a unique product or a service. The product or service may be for the benefit of the organization or stakeholders outside the organization, who are the clients. Whether the project is intended to serve the organization or the external clients, projects have a unique attribute as cited in PMI (2009). This single attribute is that projects must have a defined beginning and an end within a given time duration. The concept of time duration raises concerns about other issues that may arise in the process of meeting deadlines. These issues are cost variance, client satisfaction, scheduling, and safety.
Company Description
Redstart Construction Company (RCC) was started in 2009 and has been by Redmin Reiyal, an experienced project manager that had served in the previous successful company. RCC serves a range of clients from business firms, private developers, governmental and non-governmental institutions, schools, hospitals, and industries. For the first three years that Redmin was the manager, the company grew to serve three adjacent states in the United States. The mission of the company is to provide quality construction services, enhance customer satisfaction and experience, and to be the leading construction company in the United States. RCC works on the philosophy of teamwork, and its vision is to be sought out as the most reliable company in the construction sector, attracting competent workers in the industry, train the workers to meet the institutional standards, and retain the best from the market. For the first five years under the leadership of Redmin, RCC was able to accomplish a lot of its goals and objectives. The company grew in revenue and was one of the competing companies in the market, earning state contracts and some of the most lucrative deals from the market. RCC was faced by the first blow in 2015 when Redmin, the company manager died of an accident in one of its facilities that were still in progress. The death of Redmin was an onset of financial and company control issues that have overflowed to the stakeholders in the market.
Challenges
Even though RCC operates on the philosophy of teamwork and has a history of quality products and services, the company has developed a variety of issues in the recent past that have tarnished its image. Construction projects build the name of the company and positions it to tender and win other contracts in the market in future. Project issues such as cancellation of works, legal issues from clients and the government, as well as quality and performance issues are a threat to the firm and its future in the competitive market. RCC has become a victim of issues that have affected its services and competency in the construction sector. The primary concern is that these issues emanate from within the company and can be addressed and be solved. An analysis of these challenges and issues show that the company has the potential of rectifying its operational strategies and delivering products and services that reflect its original mission and vision statements.
Time Constraints
Time is a valuable resource for the project team and the client in the market. Extended timeframe indicates that the project team will not move to other projects and in the market. This costs the company revenue from the competitive market. It may also attract legal issues and project cancellation if the client sees that the construction team is not meeting deadlines. From the client or the developer’s point of view, time constraints may attract accumulated interest rates, especially if he borrowed the money to invest and repay the loan. The delay in completion of the project implies that clients cannot move in and start businesses. This is a loss to the owner, considering that the interest rate in the bank is counting. It is also a disappointment when the owner realizes that he may not meet the deadline he had set for the investment. RCC has been a victim of project time constraint in the recent three years. In January 2018, five clients canceled the contract with the firm, and it had to reimburse the clients as per the legal requirements. Project cancellation attracts legal consequences and is an inconvenience to the clients and the company. History of project cancellation is a threat to the future of the company, considering that clients are engaging in consumer reviews before settling for a specific contractor in the market. In this competitive market, the company has to remain reliable in the delivery of the project within the agreed time.
Quality Challenges
A quality project has an impact on the project team and the client. Quality products create satisfaction in the project team as well as the client. Potential clients in the market can use the completed project to market the company to others or even sign contracts for future contracts. According to PMI (2017), project managers have to ensure that quality standards are met throughout the project life cycle. Three factors are likely to impact the quality of the project. Time constraint may make laborers work in a hurry to meet deadlines. Cost constraints may make project managers resolve to use low-quality materials to complete the task, even when they know that they are interfering with the quality standards. While it is advisable that it is better for the project manager to save on costs, it is ill-advised to make a tradeoff between quality and the profit. The third factor for quality is the acquisition of competent workers from the market (Nadim, 2009). RCC has dropped from quality standards due to solving to use quality workers in the market. RCC has also failed to meet training requirements for its employees. Workers are always busy to meet the deadlines, and hardly find time for employee development. Employee satisfaction has also dropped, and employees only work to meet the deadlines and not to get satisfaction from the work they do.
Cost Challenges
The PMI (2017) defines cost variance as the difference between the planned work cost and the completed work cost (earned value-actual cost). Projects that are over-budgeted have a negative value, while those that are under-budgeted have a positive value. Project managers have to strike a balance to make sure that the project remains within a positive value without incurring additional costs. RCC has been a victim of cost variance, making the company suffer negative impacts in the market. In most cases, the company has had to deliver unfinished projects in the process of saving on costs. There are cases where the company has been forced to put the profits back into the business to meet the set standards due to changes in prices of materials.
Scope Creep
The PMI (2017) defines scope creep as the continuous as uncontrolled growth after the project has already started. Richard (2009) explains that scope creep is a dreaded thing in project management due to the adverse effects that it creates for the client and the project team. Scope creep is not established intentionally. It often arises due to misunderstandings of the terms and conditions during the contract formation. RCC has been a victim of scope creep, and the consequences have been undesired. In 2016, RCC was involved in legal issues due to scope creep. The company had already spent half of the money it had been paid to complete the project it had started in 2013 and had extended the deadline by six months. The client decided to cancel the contract and sue the company for the bridge of contract. RCC paid a hefty fine, and the contract was canceled.
According to PMI (2017), scope creep consumes time and costs in terms of funds. The project team dedicates time and money in adding features that were not budgeted for during the contract formation. The problem with ignoring these features is that the final product may be of low quality and lead to customer dissatisfaction. While it is correct to argue that it is challenging to tame scope creep, the project manager and his team have a responsibility of studying and understanding the project and explain everything to the client during contract formation. Any attempt to ignore smaller details attracts undesired and unfo...