The Project Budget is the sum of work package cost estimates, contingency reserve, and management reserve. It represents the total authorized financial resources available to execute the project and account for known and unknown risks.
The project budget serves as a financial baseline and is essential for monitoring performance, controlling costs, and ensuring resource alignment.
Key Characteristics
- Comprehensive Total – Includes estimated costs plus reserves
- Structured by Work Package – Derived from the work breakdown structure
- Incorporates Risk Reserves – Covers both identified (contingency) and unforeseen (management) risks
- Controlled Through Baselines – Tracked against the cost baseline during execution
Example Scenarios
- A project budget includes 100K in contingency, and $50K in management reserve
- A construction project draws from contingency when material prices increase
- Management reserves are tapped after a major scope change is approved
Role in Cost Management
- Supports Financial Planning – Defines the full cost scope for delivery
- Enables Performance Monitoring – Used for variance analysis and control
- Mitigates Risk – Provides financial flexibility for uncertainty
- Establishes Accountability – Sets expectations for resource use and oversight
See also: Contingency Reserve, Management Reserve, Cost Baseline, Work Package, Project Cost Management.