The Importance of a Baseline Budget for a Project

by Bert Wylen; Updated September 26, 2017
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A baseline budget gives a breakdown of all expected costs of a project. A properly managed project will include a baseline budget so progress may be monitored against expectations. A typical baseline budget contains individual items under the two broad categories of “materials” and “labor.” A baseline often includes a time-phased plan.

Budget Items

A baseline budget must include direct costs, indirect costs, possible contingencies, and expected profit. Direct costs include materials, labor and equipment. Indirect costs include overhead for office space and staff not directly involved with the project, as well as costs for telephones, stationery, postage, travel, taxes and fees.

Accountability

Adhering to a budget stimulates creativity. When members of a project team have a “money is no object” attitude, they tend to throw money at problems instead of finding creative solutions to them.

Changing the Baseline

The budget baseline for a project may change for two reasons. The scope of the project may expand, requiring new or more expensive budget items. During the course of the project, one or more tasks may have been underestimated and the baseline must be updated.

Busting the Budget

Evaluating the progress of the project against the baseline offers the organization the opportunity to change the scope of a project or abort it. A project with heavy cost overruns might expose a weakness in the original estimation of potential profitability, or a weakness in the project manager. Without the baseline, measuring the success or failure of the project is impossible.

About the Author

Bert Wylen began writing professionally in 1979. His articles have appeared in “The Burlington County Times,” “The Philadelphia Inquirer,” “The Philadelphia Gay News,” Brandywine.Net Business Report, “Daily Local News,” "The Courier-Post," “Small Business News,” “Software Developer & Publisher,” “The Advocate” and for radio networks Pacifica and Public Radio International. Wylen holds a Bachelor of Arts in English literature from Temple University.

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