Cost Baseline and Cost Budget
The term baseline refers to an accepted and approved project plan. We may have
multiple intermediaries baselines. baselining is an activity is approving a particular
version of a document to be a reference for project work performance.
Cost Baseline
The cost baseline is a significant part of the project baseline that efficiently manages the approximate
amount of finance the project is predicted to cost. It refers to an approved budget typically in a time
distribution format that is used to estimate, monitor and control the inclusive cost performance of the
project.
When it comes to calculating the sum budget of the project, certain estimates are required to be done.
As soon as the project schedule is ready and agreed, a bottom-up process is used for every activity of
the project with an estimated detailed cost. In this way, the fairly accurate cost for every major phase
and complete project is computed. The initial finance of all planned practices becomes the initial
estimated budget.
According to PMBOK, the cost baseline is a time-phased budget used as a foundation
against which to compute and manage the financial subdivision of the task.
Though there are many factors affecting the cost performance of a project so the assessed costs
established in the planning phase might not be project precisely. The accurate costs of some
particular tasks if not well-known at the planning phase eventually lead to unexpected additional
cost. Cost Baseline is managed under configuration management,
Cost Baseline = Project Cost Estimates + Contingency Reserves
Cost Budget aka Project Budget
This is the process of aggregating the estimated costs of individual activities or work
packages to establish a cost baseline.
Project budget similar to resource plans is a reflection of project work and the effectiveness of that
work. An all-inclusive budget provides management with an understanding of how capitals are
utilized and consumed over time for projects. The Work Breakdown Structure (WBS) makes for a
basis for any budget. It comprises of work essentials to create the product of the project.
The WBS is shaped through a breakdown procedure resulting in defined deliverables at
the lowest level of the WBS – what is known as a work package or a task in project
insight.
Any effort executed in creating the deliverable of each task is often defined in terms of cost. For
instance, facilities and materials might be used in producing the deliverables of the task. The totality
of all tasks in the WBS comprises the sum budget of the project, initial costs of all of the planned
activities will become the initial estimated budget.. Project insights typically perform bottom-up

budgeting which means that the chores roll up into summary tasks totals while the overall project
represents the summation of all tasks planned and actual costs.
Cost Budget = Cost Baseline+ Management Reserves
Important Notes
1. Cost Baseline, an output of Determine Budget is part of the Project Management Plan. Project
Budget, which includes management reserves are not under the management of Project manager.
1. Cost baseline includes contingency Reserves
2. Project Budget includes Management Reserves
3. Project Cost Estimates = Summed Cost Estimates of All the activities on the Project
Source: free-management-ebooks.
Other Baselines
 Scope baseline – All the work and only the work included. It consists of Scope Statement, WBS
and WBS dictionary
 Schedule baseline – The project schedule and all other supporting elements
 Quality/Risk baseline – the set of known possible changes (uncertainties) that could impact the
performance of the project
The baselines are interconnected and should be evaluated for impact if one of it is changed. All
changes to the Baseline must go through proper change management processes.
“Never base your budget requests on realistic
assumptions, as this could lead to a decrease in your
funding.” – Scott Adams, Dilbert