The Cost Baseline is the approved version of the time-phased project budget, excluding management reserves, that can only be changed through formal change control procedures. It serves as the reference point for measuring actual project costs.
Key Aspects of Cost Baseline
- Time-Phased Budget – Allocates planned expenditures over the project timeline.
- Used for Performance Tracking – Enables comparison of actual costs to planned expenditures.
- Excludes Management Reserves – Only includes planned costs, not unallocated contingency funds.
- Requires Change Control for Modifications – Any changes must be formally approved.
Cost Baseline in Earned Value Management (EVM)
| Metric | Description |
|---|---|
| Planned Value (PV) | Budgeted cost for work scheduled at a given point in time. |
| Actual Cost (AC) | Total cost incurred for completed work. |
| Earned Value (EV) | Budgeted cost of the work actually performed. |
| Cost Variance (CV) | EV - AC; Measures cost performance relative to budget. |
Example Scenarios
Software Development
A software company creates a cost baseline that includes planned costs for development, testing, and deployment, phased over six months.
Construction Project
A building project defines a cost baseline covering labor, materials, and equipment costs, ensuring that expenses align with forecasts.
Marketing Campaign
A global brand establishes a cost baseline for its advertising budget, allowing financial tracking against actual campaign expenses.
Why Cost Baselines Matter
- Ensure Financial Control – Helps manage project spending effectively.
- Improve Cost Forecasting – Provides a structured reference for budgeting.
- Support Earned Value Analysis – Enables accurate cost performance measurement.
- Enhance Stakeholder Confidence – Demonstrates financial planning and accountability.
See also: Baseline, Performance Measurement Baseline, Schedule Baseline, Scope Baseline.