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Introduction


- While the cost estimate deals with coming up with the project cost based on individual activities, cost budget deals with establishing a cost baseline.
- Using the cost baseline, the project performance is determined.
- Cost budgets allocate portions of the total to individual tasks. These tasks or work items are the output of the WBS process.
- The cost budget deals with determining what part of budget will be spent during what phase of the project life cycle and this allocation must be followed in order to ensure that the cost objective is reached, as mandated in the agreement or scope statement.
- The cost estimate can be a different figure compared to the cost baseline because what was estimated need not be the approved project budget. So, the idea of the budget is, proper cost allocation to individual work packages or activities to ensure better manageability and control.

Inputs


- Cost Management Plan: The process to determine the budget, what tools and techniques to use are specified here.
- Activity Cost Estimates: The Estimates are first validated as part of this process to then be approved as the cost baseline.
- Scope Baseline: Includes the scope statement, WBS and WBS Dictionary. The scope statement might mandate formal limitations on project expenditure in the form of legal fees or license costs and these might need to be spent in appropriate project phases.
- Project Schedule: The schedule is not only necessary to validate the activity cost estimates but also look at the milestones and to ensure that the budget allocation takes care as mandated in the scope statement or agreement.
- Risk Register: The contingency reserves are allocated based on the existing project risks.
- Agreements: Any mandates in agreement for project expenditure must be used as checklist to ensure proper budget allocation to different project phases, packages or activities.
- Resource Calendars: Resource Calendars are necessary to validate resource allocation and their associated cost estimates and then do any adjustments in order to accommodate any over allocation.
- Basis of Estimates: Why estimation was done in a specific way, why a certain resource was picked over another or why is cost estimate higher in a specific project phase or work package than others.
- Organizational Process Assets: Lessons learnt, processes, policies and formats related to the cost budgeting process are utilized.

Tools & Techniques


- Expert Judgment: Cost allocation needs experience and expertise and might need involvement of customers. So, the necessary stakeholder expertise is leveraged.
- Cost Aggregation: Since activity cost estimates are at the activity-level, these costs will have to be aggregated to the desired work package or the project-level to check planned expenditure with the actual funding limit.
- Historical Relationships: Since estimates are made based on historical data, the concerned model or data’ is validated to be sure about the integrity of the estimates and the budget allocation thereafter.
- Funding Limit Reconciliation: Since there might be mandated funding limits to different work packages, the planned expenditures might have to be levelled or reconciled to meet the funding limits.
- Reserve Analysis: Since contingency reserve is part of the project budget while management reserve will be used when required, reserve analysis is a continuous process in case of estimate costs and determine budget processes.

Outputs


- Cost Baseline: The approved project budget that is properly apportioned to different work packages based on the funding limit mandated by the client.
- Project Funding Requirements: The periodic funding requirements for the project are derived in order to act as guideline and also for better management control. This can have the source from where the funds will come from.
- Project Document Updates: Like, Risk Register, activity cost estimates etc.

Match the Following


1. Activity Cost Estimates – a. Determine Budget
2. Funding Requirements – b. Contingency Reserve + Work Package Cost Estimates
3. Control Accounts – c. Expenditure Rate Leveling
4. Historical Relationships – d. Estimate Costs
5. Funding Limit Reconciliation – e. Basis of Estimates

Match the Following (Answers)


1. Activity Cost Estimates – d. Estimate Costs
2. Funding Requirements – a. Determine Budget
3. Control Accounts – b. Contingency Reserve + Work Package Cost Estimates
4. Historical Relationships – e. Basis of Estimates
5. Funding Limit Reconciliation – c. Expenditure Rate Leveling