Managing Cost Baseline for Projects
After estimating project costs, you need to consolidate the costs into a project budget and prepare the project cost baselines.
Costs are one of the major constraints of any project, and your ability to manage the project’s cost will directly correlate to its success or defeat. You need to be able to enjoy sound methodology when estimating costs and carefully monitor expenditures throughout the project life cycle.
In addition, you need to be able to track project costs associated with each work package in the WBS at the points in the project lifecycle when those costs will be incurred.
By establishing a cost baseline, you can track those project costs, set up cash flow for the project, and measure coat performance for the project.
A cost baseline is a time-phased budget that will monitor and measure cost performance throughout the project lifecycle.
It is developed by adding the estimated costs of project components by period.
The cost baseline typically includes a budget contingency to accommodate the risk of incurring unidentifiable, but normally occurring costs, within the defined scope.
Cost baselines will vary from project to project, depending on each project’s unique budget and s schedule.
Once the baseline is established, the cost becomes a commitment from the Project Manager’s perspective. The Project Manager should try to closely match the project’s committed funds to the baseline, from a timing perspective.
Many project management software packages can create an s-curve of the cost baseline for you. Cost is plotted on the Y-Axis and time on the X-Axis.
Developed by totaling the estimated project cost by period, this cost-performance baseline shows how the cumulative planned project costs by period, this costs performance baseline shows how the cumulative planned project costs are distributed across the project’s duration.
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