A cost baseline is a version of the project budget that has been accepted and is used as a point of comparison for comparing real project costs and results. It acts as a standard for measuring how well a project is going and helps find differences between what was planned and what was actually spent on the project. Here are a few important things you should know about a cost baseline:
1. Development: During the planning process of a project, the cost baseline is made based on the project budget and the work breakdown structure (WBS). It is accepted by the person paying for the job and is used to keep costs in check.
2. Components: The cost baseline includes all expected costs for the project, including direct costs like labour and goods as well as secondary costs like fees and risks.
3. Timing: The cost baseline is usually set up at the start of a project, and it may be changed from time to time as the project progresses to account for changes in scope, timing, or other factors.
4.Control: Once the cost baseline is set, it becomes the reason for keeping project prices under control. The cost average is compared to the actual prices, and any differences are looked at and dealt with through the project’s change control process.
5.Reporting: The cost baseline is used to make regular reports about how well the project is doing. These reports include cost performance reports that compare real costs to planned costs and schedule performance reports that show how well the project is moving along according to the schedule.
By setting up a cost baseline, project managers can keep track of project prices and find any differences early on in the project’s lifecycle. This lets them fix problems before they get too big to handle.
