Introducing Project Cost Management - Creating a Project Budget

6 important questions on Introducing Project Cost Management - Creating a Project Budget

What is the purpose of cost budgeting?

To assign costs to the work packages in the project so it can be measured for performance.

What should be done first, cost budgeting or estimating?

Estimating should take place before budgeting.

Provide an overview of the tools used for developing a project budget?

  • Cost aggregation - cost of a work package aggregated to the control accounts aggregated to the sum of project costs
  • Reserve analysis - risk contingency reserve and management reserve (a chunk of cash for unplanned changes to project scope and cost)
  • Expert judgment -support budgeting
  • Historical relationships - using a parametric model to extrapolate costs for a project
  • Funding limit reconciliation - an approach to manage cash flow against the project deliverables (this helps to plan when monies will be devoted)
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What is the purpose of the cost baseline?

  • It allows the project manager and management to predict when the project will be spending monies and over what time period.
  • It can help the project manager and the organization determine when the project will need cash infusions.

What do we mean with the concept of project 'step' funding?

The curve of the project's timeline is funded in steps, where 'step' is an amount of funds allowed to the project to reach the next milestone in the project.

What do we mean with phase gate?

That at certain points in the project, usually at the end of a phase, the project is paused for review and determination of additional funds for the project.

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