HKSM
Determine Budget
The process of summing the cost estimates for activities or work packages to create the approved project cost baseline.
Key Points
- Totals activity and work package estimates to form a time-phased cost baseline.
- Includes contingency reserves in the baseline; management reserves sit outside the baseline but count toward the total project budget.
- Uses inputs such as cost estimates, scope and schedule baselines, resource rates, risk data, and historical information; techniques include cost aggregation, reserve analysis, and funding limit reconciliation.
- Primary outputs are the cost baseline and project funding requirements, plus updates to relevant documents.
Example
A construction PM rolls up the estimated costs of foundation, framing, electrical, and plumbing work packages, adds contingency for identified risks, aligns the spending plan with quarterly funding limits, and produces the approved cost baseline used to track performance.
PMP Example Question
A PM is consolidating work package cost estimates to produce the time-phased budget used for cost performance measurement. Which process is being performed?
- Estimate Costs
- Determine Budget
- Control Costs
- Plan Cost Management
Correct Answer: B - Determine Budget
Explanation: Determine Budget aggregates cost estimates into an approved cost baseline used to measure and control cost performance.
