A cost baseline is a time-phased budget that represents the project’s authorised resource allocation plan. The baseline is used to compare actual project costs and performance to the original plan. The cost baseline is typically established during the project’s planning phase and is incorporated into the project management plan.
The cost baseline is a crucial instrument for monitoring and regulating project expenses. It provides a basis for comparing actual project costs to anticipated project costs, identifying variances, and taking corrective action as required. The cost baseline comprises all project expenses, including direct and indirect costs, contingency and management reserves.
Typically, the cost baseline is broken down into specific time periods, such as months or quarters, and includes a comprehensive analysis of the cost components. There may be labour costs, material costs, equipment costs, subcontractor costs, and other direct costs among the cost elements. Indirect costs, such as overhead and administrative expenditures, may also be included.
Once the cost baseline has been established, it becomes a crucial project performance metric. The purpose of variance analysis is to compare actual project costs to the cost baseline and identify deviations. If actual costs exceed the cost baseline, corrective action may be necessary to get the project back on track.
A cost baseline is a time-phased budget that represents the project’s approved resource allocation plan. It is used as a benchmark to compare actual project costs and performance to the original plan.
