Process: Determine Budget
Process Group: Planning
Knowledge Area: Project Cost Management
Purpose
The Determine Budget process involves aggregating estimated costs of individual activities or work packages to establish an authorized cost baseline. This baseline includes all project costs and provides the benchmark for measuring and managing financial performance throughout the project lifecycle.
Inputs
- Project Management Plan – Especially the cost management plan, resource management plan, and scope baseline.
- Project Documents – Cost estimates, basis of estimates, project schedule, and risk register.
- Business Documents – Includes the business case and benefits management plan.
- Agreements – Contracts or procurement commitments that define financial obligations.
- Enterprise Environmental Factors (EEFs) – Funding availability, exchange rates, and budgeting tools.
- Organizational Process Assets (OPAs) – Budgeting policies, templates, and historical project data.
Tools and Techniques
- Cost Aggregation – Summing estimates at the work package level to higher components such as control accounts and the overall project.
- Reserve Analysis – Incorporating contingency reserves for known risks and management reserves for unforeseen work.
- Expert Judgment – Applied to funding requirements, timing, and cash flow considerations.
- Historical Information Review – Reference to actual costs from previous similar projects.
- Funding Limit Reconciliation – Ensuring planned expenditures align with funding constraints or staged funding releases.
- Financing – Addressing external funding or financial arrangements, if applicable.
Outputs
- Cost Baseline – The approved version of the budget, including contingency reserves but excluding management reserves.
- Project Funding Requirements – Total expected funding, including cash flow projections and timing.
- Project Document Updates – Adjustments to cost estimates, risk register, and assumption log.
Role in the Process Group and Knowledge Area
- In the Planning Process Group, Determine Budget consolidates all cost planning into a single reference point for performance measurement.
- Within Project Cost Management, it establishes the baseline needed to track spending, forecast future costs, and control changes.
Why It Matters
- Establishes Financial Targets – Forms the basis for managing and controlling project cost performance.
- Aligns with Funding – Ensures that resources are available when needed, according to the planned schedule.
- Enables Cost Control – Provides a reference for measuring variances and initiating corrective actions.
- Supports Stakeholder Transparency – Clearly communicates how and when funds will be used.