#PM Cost Management—A Closer Look at the Outputs of the Determine Budget Process

1. Review: Three stages of the Determine Budget Process

The three stages of the Determine Budget Process are represented graphically below.

Fig. 1 Three Stages of the Determine Budget Process

There are three outputs from the Determine Budget Process.

1. Cost Performance Baseline

As a result of Stage 3 of the Determine Budget Process, the time-phased budget is created which shows how much of the budget is scheduled to be allocated at any point in time of the project. See diagram below, taken from Figure 7-6 in the PMBOK® Guide. T

The x-axis represents the point of time on the project schedule, and the y-axis represents the amount allocated in the budget cumulatively up to that point. For any point along the curve, the y-axis will give you the planned value or PV for that particular point in the project.  The rightmost point of the curve, at the point where the project is scheduled to end, is the Budget at Completion, or BAC.

2. Project Funding Requirements

In the above diagram, you also see the periodic funding requirements if the funding for the project is supplied in increments during the project rather than all at once at the beginning of the project. If there are such funding requirements, it is important that the project manager at any point in time on the project watches not only the actual costs versus the planned value (the point on the cost baseline curve that corresponds to that point in time on the project), but also what the periodic funding requirements are so that there the project’s costs don’t get too far “ahead of the curve”, which might cause further delays.

3. Project Document Updates

There will be updates to the following project documents:

Project Document Updates
1. Risk Register Contingency reserves
2. Cost Management Plan (part of Project Management Plan) Cost performance baseline (against which project performance will be measured and actions taken to control costs during the course of the project)
3. Project Schedule May have been altered due to funding limit reconciliation; usually results in longer schedule.

The Estimate Costs and the Determine Budget process are both in the Planning Process group. The next post will discuss this next process, which is the final cost management process, Control Costs, in the Monitoring & Controlling Process Group.


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