Welcome!

Article

Creating Budget Or Cost Baselines For Projects

Creating Budget Or Cost Baselines For Projects

In Project Management, the term project baseline refers to an accepted and approved project plan. Besides the schedule baseline, the cost/budget baseline is the most important part of  a project baseline. The cost baseline is that part of the project baseline that handles the amount of money the project is predicted to cost and on the other side when that money will be spent. It is an approved budget usually in a time distribution format used to estimate, monitor, and control the overall cost performance of the project.

In some cases there can be several intermediary baselines. This happens when either the project was not well planned or when significant changes appear to the scope of the project. However the initial baseline is usually what gets budgeted in the company’s financials. All types of baselines are closely related and changes to one of them will result in changes to the others. If a change is made in the project scope baseline, the schedule baseline gets adjusted and hence the cost baseline will probably have to be changed as well.

How is cost baseline created

When it comes to computing the total cost of the project some estimates need to be done. Once the project schedule is ready and approved, a bottom-up procedure should be used where for each activity of the project it is estimated a detailed cost. This way a total cost for each major phase and for the entire project gets computed. These initial costs of all of the planned activities will become the initial estimated budget.

Cost Analysis

According to PMBOK the cost baseline is a “time-phased budget that is used as a basis against which to measure, monitor, and control overall cost performance on the project.” But many factors can affect the cost performance of a project so the above estimated costs established during the planning phase might not be estimated that well. The true costs of certain tasks may not be well known at planning time. If a given price for materials, trainings or travel costs was taken into consideration at planning phase but at execution time these are increased there is an unforeseen additional cost.

Time is another factor that can affect the costs. The timeframe for task execution may vary so this will have a direct impact over the estimated cost of that task. If a task duration was not well estimated and for certain reasons it is increased this will result in more work to be done and hence an additional cost. If budget is fixed for the project, the manager will need to find a solution to reduce costs in other areas of the project. One possible solution would be to remove other expendable tasks but in this way the project deliverables might get affected, resulting a change in the scope baseline and further more a change in the schedule baseline. Another approach could be to use less expensive resources. But there is a drawback to this solution: less expensive resources have usually less experience or a restrained skill set. Hence the result will be the same as in the first case because tasks might take longer than originally planned and will again affect the schedule baseline.

A certain degree of risk must be taken into consideration when building the cost baseline. The lack of enough money to get the project done is such a risk. Unidentified work is another risk that can affect the cost of the project. That is why it worth investing time in a well done project plan.

Using project management software is the indicated and the most efficient way to work on your cost baseline.

More Stories By Lucian Loan

Lucian Loan studied at a technical facility and has an MS in Computer Science. He is now working in the software industry for Stand By Soft, a software company that specializes in building desktop applications and components.

Latest Stories
"ZeroStack is a startup in Silicon Valley. We're solving a very interesting problem around bringing public cloud convenience with private cloud control for enterprises and mid-size companies," explained Kamesh Pemmaraju, VP of Product Management at ZeroStack, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
"Codigm is based on the cloud and we are here to explore marketing opportunities in America. Our mission is to make an ecosystem of the SW environment that anyone can understand, learn, teach, and develop the SW on the cloud," explained Sung Tae Ryu, CEO of Codigm, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
High-velocity engineering teams are applying not only continuous delivery processes, but also lessons in experimentation from established leaders like Amazon, Netflix, and Facebook. These companies have made experimentation a foundation for their release processes, allowing them to try out major feature releases and redesigns within smaller groups before making them broadly available. In his session at 21st Cloud Expo, Brian Lucas, Senior Staff Engineer at Optimizely, discussed how by using ne...
"CA has been doing a lot of things in the area of DevOps. Now we have a complete set of tool sets in order to enable customers to go all the way from planning to development to testing down to release into the operations," explained Aruna Ravichandran, Vice President of Global Marketing and Strategy at CA Technologies, in this SYS-CON.tv interview at DevOps Summit at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"There's plenty of bandwidth out there but it's never in the right place. So what Cedexis does is uses data to work out the best pathways to get data from the origin to the person who wants to get it," explained Simon Jones, Evangelist and Head of Marketing at Cedexis, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"Cloud Academy is an enterprise training platform for the cloud, specifically public clouds. We offer guided learning experiences on AWS, Azure, Google Cloud and all the surrounding methodologies and technologies that you need to know and your teams need to know in order to leverage the full benefits of the cloud," explained Alex Brower, VP of Marketing at Cloud Academy, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clar...
Large industrial manufacturing organizations are adopting the agile principles of cloud software companies. The industrial manufacturing development process has not scaled over time. Now that design CAD teams are geographically distributed, centralizing their work is key. With large multi-gigabyte projects, outdated tools have stifled industrial team agility, time-to-market milestones, and impacted P&L stakeholders.
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
Enterprises are moving to the cloud faster than most of us in security expected. CIOs are going from 0 to 100 in cloud adoption and leaving security teams in the dust. Once cloud is part of an enterprise stack, it’s unclear who has responsibility for the protection of applications, services, and data. When cloud breaches occur, whether active compromise or a publicly accessible database, the blame must fall on both service providers and users. In his session at 21st Cloud Expo, Ben Johnson, C...
"Infoblox does DNS, DHCP and IP address management for not only enterprise networks but cloud networks as well. Customers are looking for a single platform that can extend not only in their private enterprise environment but private cloud, public cloud, tracking all the IP space and everything that is going on in that environment," explained Steve Salo, Principal Systems Engineer at Infoblox, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventio...
Data scientists must access high-performance computing resources across a wide-area network. To achieve cloud-based HPC visualization, researchers must transfer datasets and visualization results efficiently. HPC clusters now compute GPU-accelerated visualization in the cloud cluster. To efficiently display results remotely, a high-performance, low-latency protocol transfers the display from the cluster to a remote desktop. Further, tools to easily mount remote datasets and efficiently transfer...
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"MobiDev is a software development company and we do complex, custom software development for everybody from entrepreneurs to large enterprises," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Agile has finally jumped the technology shark, expanding outside the software world. Enterprises are now increasingly adopting Agile practices across their organizations in order to successfully navigate the disruptive waters that threaten to drown them. In our quest for establishing change as a core competency in our organizations, this business-centric notion of Agile is an essential component of Agile Digital Transformation. In the years since the publication of the Agile Manifesto, the conn...