7.3 Determining Budget

The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

Key benefit: it determines the cost baseline against which project performance can be monitored and controlled.

Frequency: once or at predefined points in the project.

A project budget includes all the funds authorized to execute the project.

The cost baseline is the approved version of the time-phased project budget that includes contingency reserves minus management reserves.

Process/ Asset Group	Input	The process	Output	Process/ Asset Group
Project Management Plan	Cost management plan	7.3 Determine Budget	Cost baseline	Project Management Plan
	Resource Management Plan		Project funding requirements	7.4 Control Costs
	Scope baseline		Cost estimates	Project documents
Project Documents	Basis of estimates		Project Schedule
	Cost estimate		Risk register
	Project Schedule
	Risk register
Business Documents	Business case
	Benefit management plan
12.2 Conduct Procurements	Agreements
Enterprise/ Organization	Enterprise environment factors
	Organizational process assets

7.3.1 Inputs

7.3.1.1 Project Management Plan

Includes:

• Cost management plan. How the project costs will be structured in the budget.
• Resource management plan. Rates on resources, overheads, other foreseen costs.
• Scope baseline. The project scope statement, WBS, WBS dictionary.

7.3.1.2 Project Documents

Include:

• Basis of estimates.
• Cost estimates.
• Project schedule. Planned start/finish dates, milestones, work packages, control accounts -> aggregate costs to the calendar periods.
• Risk register. How to aggregate the risk response costs.

7.3.1.3 Business Documents

• Business case. The critical success factors.
• Benefits management plan. Target benefits, timeframe for them, metrics.

7.3.1.4 Agreements

Cost related information.

7.3.1.5 Enterprise Environment Factors

Exchange rates.

7.3.1.6 Organizational Process Assets

Includes:

• Existing formal/informal cost budgeting-related policies, procedures, guidelines;
• Historical information and lesson learned repo;
• Cost budgeting tools;
• Reporting methods.

7.3.2 Tools and Techniques

7.3.2.1 Expert Judgement

Topics:

• Previous similar projects;
• Financial disciplines;
• Funding requirements and sources.

7.3.2.2 Cost Aggregation

Aggregation in accordance with the WBS -> control accounts -> entire project.

7.3.2.3 Data Analysis

Reserve analysis -> management reserves for the project: an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project, for unknown unknowns. It is not includes into the cost baseline but is a part of the budget. If the reserve is used the amount is included into the baseline through change control project.

7.3.2.4 Historical Information Review

For parameters (project characteristics) or analogous estimates. Regression models. Used when:

• Historical information is accurate;
• Data are quantifiable;
• Model is scale-able.

7.3.2.5 Funding Limit Reconciliation

The expenditure are under funding limits. Variances -> rescheduling of work -> out the rate of expenditure (?).

7.3.2.6 Financing

Funding methods for external financing. It can add additional requirements to the project.

7.3.3 Outputs

7.3.3.1 Cost Baseline

Approved version of the time-phased project budget, excluding management reserves. It is used as a basis to compare with actual results.

7.3.3.2 Project Funding Requirements

Total and periodic are from the cost baseline.

7.3.3.3 Project Documents Updates

• Cost estimates.
• Project schedule.
• Risk register.