Project Management: Foundations to Practice · Cost Management and Earned Value Management
Budgeting and Cost Baselines
A cost baseline is not just a total number, it is a time-phased plan, and confusing the two is a common source of budget surprises.
Once individual cost estimates are developed, they are aggregated into a cost baseline, a time-phased budget used to measure and monitor cost performance throughout the project [1]. The cost baseline is not simply the total budget; it shows how spending is expected to occur over time, which matters because a project can be on budget in total while being significantly over or under budget at any given point in its timeline.
Key Takeaways
- A cost baseline is a time-phased budget, not just a total figure; timing of spend relative to progress matters as much as the total.
- A project can be on budget in total while badly off track at any specific point in its timeline, invisible to a total-only view.
- Contingency reserve covers identified, quantified risks and is controlled by the project manager; management reserve covers unknown risks at a higher level.
- Spending contingency reserve on scope additions rather than genuine risk events is a common, avoidable cause of later budget overruns.