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Project cancellation is the termination of a project prior to its completion, and generally includes the cessation of access to funding and other project resources. Project cancellation may result from cost overruns, schedule overruns, changes in budget, change or obviation of the goal of the project, political factors, or any combination of these and other factors. Contracts often stipulate the time and manner in which a project may be cancelled.
Contracted projects typically have a specified end date, at which point the contract may or may not be renewed; non-renewal often has the same effect as cancellation, but carries different legal ramifications.
In software development
Cancellation occurs for around half of U.S. software development projects, whether developed for in-house corporate use or for sale as retail software. When a project is cancelled early on, it probably has little financial effect, but if project sponsors wait until the project has gone over budget, it can be very expensive.
Software engineers and business analysts have studied the reasons for project cancellation. Most are due to poor planning or the lack of planning.
The biggest worry and most troublesome concern for managers is the waste of resources that occurs when projects are cancelled. Some project cancellations are widely reported and acknowledged in the media – the most notorious example in 2005 being the failed $170 million FBI project to update their case management system. Since no one wants to admit failure, especially public companies, the vast majority of internal corporate project cancellations are performed quietly and are not as widely reported as the FBI case. However, it is generally understood by most business people that cancellations do occur regularly in their organizations. A related topic is deciding when to cancel a project. Early identification and action will permit project resources to be re-deployed to other projects. Based on the number of projects that a company is pursuing at any given time, the total value of cancelled projects could be as much as 10% of the total annual IT development budget. Cancelled projects are not generally analyzed when developing ROI calculations.