Process Group: P
Aggregating the estimated cost of individual activities or WP to establish an authorized cost baseline, which includes all authorized budgets, but excludes Management reserves.
|1. Cost Mgmt Plan
2. Scope Baseline
3. Activity Cost Estimates
4. Basis of Estimates
5. Proj Schedule
6. Resource Calendars
7. Risk Register
|1. Cost Aggregation
2. Reserve Analysis
3. Expert Judgment
4. Historical Relationships
5. Funding Limit Reconciliation
|1. Cost Baseline
2. Proj Funding Requirements
3. Proj Doc Updates
Determining the project budget is the process of aggregating the cost estimates for all project activities and assigning a timeline to them. Cost aggregation is the technique used to calculate the cost of a whole by summing up the costs of the parts of which the whole is made. You can use the bottom-up estimation technique to aggregate the costs of all the components and activities to calculate the total cost of the project. The timeline assigned to this cost will be important to reconcile the expenditure with the funding limits. The reconciliation may require rescheduling some activities.
The reserve analysis at budget level includes management reserve in addition to contingency reserve, and you must understand the difference between the two. Contingency reserves are the funds that can be used to deal with the unplanned events that can potentially transpire in case one or more identified risks occur, whereas management reserves are the funds that can be used in case of yet unplanned but future changes in some aspects of the project, such as the project scope.
The approved budget that includes the aggregated cost with timeline is called the cost baseline. The cost performance of the project is monitored, measured, and controlled against this baseline. This is why it’s also called the cost performance baseline. Funding requirements for the project are derived from the cost baseline and the reserve analysis.
Do not leave out the cost of the internal employees of the organization who will work on the project. They are not free, for two reasons: The organization pays for them, and they do not have infinite numbers of hours to put into the project. Their cost to the project will be determined just like any other project role based on the hours of work they will put into the project.
In the process of determining the budget, you may need to update the project schedule, cost estimates, and the risk register.
Your organization may not have the resources to complete all parts of the project. For those parts of the project, you will need to use what is called procurement.