Strategies for Developing the Budget for a Project at Work

Developing the project Budget

The tools and techniques used to create the project cost estimates are also used to create the project budget. Here is a quick reminder of the four components.
Analogous budgeting: this is the form of expert judgment that uses a top-down approach to predict cost. It is generally
Parametric: modelling; This approach uses a parametric model to extrapolate what costs will be for a project (for example cost per hour and cost per unit) It can include variables and points based on conditions.
Bottom- up budgeting; This approach is the most reliable though it also takes the longest to create. It starts at zero and requires each work package to be accounted for.
Computerized Tools: The same software programs used In estimating can help predict the project budget with some accuracy.

Creating the Cost Baseline

A project 5 cost baseline shows what Is expected to be spent on the project The idea of the cost baseline allows the project manager and management to predict when the project will be spending monies and over what time period the purpose of the cost baseline Is to measure and predict project performance.
Figure 9: Cost baselines shows predicted project and phase performance.
Large projects that have multiple deliverables may have multiple cost baselines to illustrate the costs within each phase
Additionally, larger projects may have cost baselines to predict spending plans cash flows of the project, and overall project performance
The purpose of a cost baseline is to measure the performance and a baseline will predict the expenses over the life of the project Any discrepancies early on in the predicted baseline and the actual costs serves as a signal that the project’ Is slipping

Implementing Cost Control

Cost Control focuses on the ability of cost to change and on the way of allowing or preventing cost change from happening. When a change does occur, the project manager must document the change and the reason why the change has occurred and, if necessary, create a variance report. Cost control is concerned with understanding why the cost variances, both good and bad have occurred. The “why“ behind the variance allows the project manager to make appropriate decision on future projects actions?
Specifically, cost control focuses on these activities:
Controlling causes of change to ensure the changes are actually needed
Controlling and documenting changes to the cost baseline as they happen
Controlling changes in the project and their influence on cost
Performing cost monitoring to recognize and understand cost variances
Recording appropriate cost changes in the cost baseline
Preventing unauthorized changes to the cost baseline
Communicating the cost changes to the proper stakeholders
Working to bring and maintain costs within an acceptable range

Considering Cost Control

To implement cost control, the project manager must rely on several documents and processes:

Cost baseline the cost baseline is the expected cost the project with Incur. This time—phased budget reflects the amount that will be spent throughout the project. Recall that the cost baseline is a tool Used to measure project performance.
Performance reports these reports focus on project cost performance, project scope and planned performance versus actual performance. The reports may vary according to stakeholder needs.
Change requests When changes to the project scope are requested an analysis of the associated costs to complete the proposed change is required in some instances, such as removing a portion of the project deliverable, a change request may reduce the protest cost
Cost management plan the cost management plan dictates how cost variances will be managed.

Creating a Cost Change Control System

Sometimes a project manager must add or remove costs from a project. The Cost Change Control System is part of the integrated Change Control System and documents the procedures to request, approve, and incorporate changes to project costs.
When a cost change enters the system, there is appropriate paperwork, a tracking system, and procedures the project manager must follow to obtain approval on the proposed change.

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