Project Cost Management - Determine Budget

This process aggregates the estimated costs of individual activities of work packages to establish an authorized cost baseline.

Lets take a look at the Inputs, Tools and Techniques and Outputs for this process.

1) Cost Management Plan

• Describes how the project costs will be managed and controlled.

2) Scope Baseline

• Contains the following information to help determine budget:
• Project Scope Statement - funding constraints
• Work breakdown structure - provides relationships between deliverables and other components
• WBS dictionary - detailed descriptions wo work required

3) Activity Cost Estimates

• Estimate costs of each activity are aggregated to get the cost estimate for the work package

4) Basis of Estimates

• The supporting detail for cost estimates should specify any basic assumptions of cost for the budget

5) Project Schedule

• The planned start and finish dates, activities, milestones, work packages and control accounts costs are aggregated to plan which costs are to be incurred.

6) Resource Calendar

• Information about resources are assigned to the project and when they are assigned gel indicate resource costs over the duration of the project. 

7) Risk Register

• Review the risk register to aggregate the risk response costs. 

8) Agreements

• Review the agreements as agreement information and costs will help you determine the budget.

9) Organizational Process Assets

• Assets that will may influence determine budget process include:
• Existing policies, procedures, and guidelines
• Cost budgeting tools
• Reporting methods

10) Cost Aggregation

• These are aggregated by work packages and then aggregated for the higher control accounts on the WBS. 

11) Reserve Analysis

• Establishes both the contingency reserves and the management reserves for the project.

12) Expert Judgement

• Use the experts that will help guide you in the specific Knowledge Area, discipline, industry, or similar project to help determine the budget. 

13) Historical Relationships

• Result in parametric estimates or analogous estimates involve the use of project characteristics to develop mathematical models to predict total project costs. They can be simple or complex models and are more reliable when:
• Historical information used to develop the model is accurate
• Parameters used in the model are readily quantifiable
• Models are scalable

14) Funding Limit Reconciliation

• The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. At times you may have to reschedule work to level out the rate of expenditures. 

15) Cost Baseline

• The cost baseline is the approved version of the time-phased project budget and excludes the management reserves. As the project moves through time you will be able to see what costs are needed to be paid for at what point in the project. You can represent this on a graph so that you can see the cost baseline start low for the project then go higher the more you spend. Also the Management Reserve costs can only move into the Cost Baseline through the Change Control Process. 

16) Project Funding Requirements

• Total funding requirements and the periodic requirements are concluded from the cost baseline.

17) Project Documents Updates

• Updates may include:
• Risk register
• Activity cost estimates
• Project schedule

Source: PMBOK 5th ed.