Embedded Files
WHAT IS A BUDGET REQUEST?
WHAT IS A BUDGET REQUEST?
Throughout your career, it is common to need access to capital you don't personally control. Typically this "capital" is money, but can include other resources such as equipment, computing resources, and workforce. This is generally done through a request to management, investors, partners, boards of directors, or government agencies.
Developing the ethical, organizational, and communication skills associated with successful budget requests is critical in many technical careers.
ETHICS OF BUDGET REQUESTS
ETHICS OF BUDGET REQUESTS
Requesting a budget is a critical task within many senior design projects. It is common for technical professionals to be in circumstances related to large sums of money and resources where they can take advantage of others due to privileged knowledge or know-how. In such instances, it is all the more important for you to behave ethically and responsibly.
Over-Requesting
If you over-request funding and become over-allocated, your team may starve other teams of what they need while encouraging poor behavior within your own ranks.
Having too much capital often encourages glut and discourages creativity. Many businesses have been ruined by wretched excess while many more have been starved by the wretched excess of their neighbors, partners, or counterparts.
In the long run, requesting way more than is justified is likely to reduce trust in your investors, partners, and customers which will impact your ability to get future resources and projects.
Metaphor: If you use all the concrete in the tri-state area to build a bridge, that bridge may be successful, but the waste of resources means other bridges aren't able to be build as a result. You are also unlikely to get contracted to build the next bridge.
Dishonesty/Falsification/Negligence
If you are dishonest or negligent in an application for funding, your team may not only see repercussions on your reputation but may see legal ramifications in industry.
Requesting and/or receiving funding under false or mis-represented pretenses is short-sighted and likely to come with major consequences for your career and organization.
Negligence is often the result of excessive optimism (wearing rose-colored glasses) or failure to do appropriate research (simply didn't do the work).
Some individuals and organizations who have behaved in such a manner in industry have been charged with criminal fraud and falsification along with civil breach of contract and negligence.
Under-Requesting
If you fail to request and acquire sufficient funding, your team may struggle or fail to accomplish your goals.
Under-allocation is often not considered in ethical budgeting, but it can have major repercussions.
The goal is not to starve your team. Bankrupt companies fail even if their ideas are good. Much like a classically engineered system, the goal is to get as much as is necessary plus an appropriate margin of safety to account for unexpected demands.
Metaphor: If you design a bridge that is incredibly low margin so you could have the lowest bid and it fails structurally, the net benefit to the community was negative.
PREPARING FOR A BUDGET REQUEST
PREPARING FOR A BUDGET REQUEST
A well prepared team must understand a great deal of context to request a responsible amount of money to accomplish their goals.
Requesting a budget should start with the following:
Understand your own team's goals and requirements.
Become very familiar with what your project entails. Not all projects are equal. Some will require significant amounts of resources and other may not require any.
Do research and begin concept designs to evolve your intended solution quickly and get rid of the dead-ends. If you don't have a general idea of what needs to be done, it becomes very difficult to know how much it will cost.
Develop a plan.
This is an intrinsic part of the senior design program and is the only way you can reasonably estimate future costs.
Plans are never perfect, but the better you can anticipate the future, the more accurate your requests can be which will lead to happier investors and more successful projects.
Estimate your future expenses.
In early phases of projects, project teams rarely if ever have an exact design to work off of. Use rough sizing and approximate concepts to price out raw material, component, and/or service costs.
Do simple hand calcs on a structure to determine how large beams need to be and how many of what sized fasteners are necessary on first order. Pull those costs from an online dealer or call in a spot quote at a local vendor.
Estimate throughput on an electrical component using a first-order approximation and see what the online cost is for the parts which can handle that load from a distributor.
Make a rough estimate of how many calls are expected to a hosted server through testing along with how much storage will be necessary then do a simple calculation based on how much that host charges for those services.
Evaluate your confidence in your rough estimates and apply an appropriate margin of safety.
If you know your design and inputs are very stable and your estimates are conservative such that you're likely to reduce need over time, you may only need to apply a small 5-10% margin to your estimate. Some cases may require no margin at all.
If your input numbers are low confidence (e.g. wind loads may come in 50% higher requiring more steel, the server could easily see 10x demand we expect driving more storage and requests, the price of copper is fluctuating wildly due to market forces), applying a commensurately larger margin of safety is wise.
If available, look at similar designs/projects/services and how much they cost to estimate your development to check your work.
Many times, there are similar projects, products, or services which can be used as a spot check of a team's estimate. It may not always be to your advantage to use these as a starting-point as it can stifle new ideas, but it is often valuable to do a comparison at some point in your process to see if there is something you're missing.
If you are developing a medical device and you think it have a production cost of $1,400 each, and then you research and discover that a similarly capable device sells for $500 each, you may discover that they used a different manufacturing process or material which is much more efficient at doing the same job. Alternatively, if you find out they sell for $24,000 each, you may discover in research that there is something essential your product was missing (or it may indicate there is a hole in the market for competition).
Understand how much funding is available and who is competing for it.
Whether it is senior design, venture capital, government contract bidding, research grants, or any other capital request, it is to your advantage to know how much money is available and who wants it.
While there may not always be perfect transparency into dollar amounts or competing bids, there are typically some reasonable guesses that can be made. In other cases, it may be spelled out in public.
Suppose there is $1,000,000 available in public contracts to develop data tools, and you know there's very little competition. You think you can develop a good tool for a trivial $700, but there may be issues in development leading it to cost several times that. So long as the tool will present more value to the customer than your bid, it likely isn't at all irresponsible to bid several thousand or more to insure your odds of success.
Suppose a Department of Defense bidding process has issued to develop a new cargo aircraft for the military. There is a maximum $25B available. Your company thinks they can develop the aircraft for $18B overall with a modest profit, but your competitor will likely has a very similar bid. Your company may decide to bid slightly lower to secure the funding, knowing that there is another $3B development contract for a technology NASA is interested in you will need to use on the aircraft anyway. Since you're very likely to win the development over your competitor due to your competency in the area, you can distribute the cost and win both bids. If the development cost becomes sufficiently low due to these economics, the Department of Defense may choose to have both competitors develop the aircraft and benefit from the diverse sources and continued competition.
Have a backup plan.
Have an idea or set of ideas for what you would do if you didn't get all the funding you requested.
There may be ways to reduce your scope and still satisfy your requirements.
There may be other sources of funding you can request.
There may be more clever design or process strategies to reduce inefficiencies or waste in your design.
Most professionals will have a time in their career where the funding doesn't show up. What you do in these tough circumstances may have major impacts on your success.
CONSTRUCTING A BUDGET REQUEST
CONSTRUCTING A BUDGET REQUEST
At a basic level, any request is communication. Understanding what you are trying to accomplish, who your audience is, and what tools you have to communicate with are essential. Industry has a number of ways that bids, budget requests, investment proposals, loan applications, and other means funding are processed. In the case of senior design, there is a basic set of information and template for what a budget request should contain and look like.
Team information: This is basic identification information used to track the request.
Fill this out clearly and accurately. If there are errors here, your investor isn't likely to have confidence in your team's attention to detail and proficiency in design. Your request may also fail to process entirely.
Prior budget: This is the total amount of money that has been previously allocated from this source. This tells your investor how much you have already received and if you've been keeping track of it.
They may spot check this against how you've performed so far; if someone gave you a lot of money already and you have done very little with it, they may be less likely to provide more. The opposite is also true where successful past performance may yield more capital.
Your investor may audit the prior number you provide against their and other's records; if your number is wrong, it may mean you haven't kept good track of their funds or are acting in a deceitful manner and may not be a good future steward of their money/resources.
Prior expenditures: This is the total amount your team has spent already. This tells your investor something about what you've done with the money they already gave you.
Investors will vary in terms of their interpretation of this number. Some may be happy if you have been very frugal, while others may view a lack of spend as an indication that you could be using that capital to go faster than you are.
In this case, it is good to know your investor's tendency, and it can also be helpful to have them know you. You want them to have confidence in your past and future progress. There's no better way to do this than to perform and execute well.
Additional budget requested & proposed total budget: This is the increase in budget you are looking for and what your new total budget raised would be.
Provides the full suite of information at a glance.
It is not a good look to mess up the arithmetic here.
Justification: This is why you are requesting the additional funds. If there is lots of competition for funds, this is where you'll make or break.
Reason backwards from the requirements of the project. Your investor will want to know generally what it is you intend to buy, but they will want to know specifically why it is you need to buy that type of thing.
Valuable strategies here are pointing to your contractual obligations with your customer, citing your project objectives and their value, contrasting with one or more alternatives which you must choose between.
Don't simply say "We need this for our project," or "This will help us achieve our goals."
Do lay out the first-principles logic for why your request is essential or valuable, such as "Our project contract requires that our team build a prototype structure which can carry the load of our sponsor's industrial equipment. We have developed a preliminary design which can handle 150% of required load to account for uncertainty and expansion capabilities on top of necessary factors of safety (preliminary design attached) and we estimate this will require approximately $1,700 in raw materials, $250 in hardware, and $500 in contract weld inspection (preliminary cost estimate attached)."
Lay out your chances of success and risk meditation strategy. Much of this should be transposable to or from your project management section of the project plan and status reports.
Do be honest about risks. Risk disclosures may look like "While we believe our initial analysis is conservative, there may be uncertainties in dynamic loading and welded material strength which could require added material and processing." These types of disclosures may be used to warn your investor that you may need more funding in the future or it may be used to justify stated margins included in the current request.
Don't sugar-coat or hide the risks. Your investor will be your partner in these endeavors; so hiding or minimizing risk is short-sighted, is typically (if not always) unethical, and may be considered fraud with criminal or civil legal repercussions.
Don't exaggerate the risks either. If you irrationally scare everyone involved, you may find it difficult or impossible to get back on track. This may effect more than your investors, but also your management and team mates.
EXAMPLE AND BUDGET REQUEST FORM
EXAMPLE AND BUDGET REQUEST FORM
SUBMITTING A BUDGET REQUEST
SUBMITTING A BUDGET REQUEST
Once the form is complete, budget requests are submitted through a ticket system for tracking purposes. Click the button below to be taken to the ticket.
Page updated
Report abuse