In regards to the original question of “does a budget cut affect the cost estimation of a project”, I believe it does. However, I would like to add to the conversation that the timing of the budget cut within the development process has a lot to do with the final cost estimation of a project. If the project experiences severe budget cuts early on, it is more susceptible to be significantly altered to fit the new budget. This is in contrast to a budget cut that occurs later on in the project’s life where the timeline, R&D, and most of the expenses have already occurred. In this latter case, an unaccounted for budget cut would be more crippling to the project due to all the compensation occurring towards the end. Ideally, it is good proactive to concede minor successions throughout the project rather than cut major parts out at the end directly compromising the end product.

During my time in industry, the project I was working on was actually overestimated (both funds and amount of time required) which allowed for more time and effort to be put into the solution. When this occurred, the PM generously extended the contracts of some temporary employees to give them more experience within the company and “returned” the remaining unused money back to the company.

David