Cost Baseline

Purpose

The cost baseline is a real or theoretical construct that captures the approved budget distributed over time. It is used to provide a comparison or contrast with the actual costs and their application over time. The cost baseline is used to determine if performance to date is within acceptable parameters.

Application

The baseline is normally maintained with other project information in either project management or spreadsheet software. It is used both for comparison and reporting and is normally a critical element in project status reports, progress reports, and forecasts. The cost baseline serves as affirmation of what the project’s cost structure looked like when the project was originally approved. According to the Project Management Institute, the cost baseline incorporates any approved changes.

The cost baseline is developed by aggregating the costs of the individual work elements and then combining them at time (or work) intervals where meaningful actual cost information will be available.

Content

The cost baseline includes work element-by-work element, time unit-by-time unit detail depicted across the timeline. One of the most common depictions of the cost baseline is the expenditure of funds.

The cost baseline can also simply be a work breakdown structure with an additional column for the baseline costs of each work package.

Approach

Because cost information comes in a variety of formats and can be displayed in the context of time or work, the formats for the cost baseline are legion. While the cumulative cost curve is among the most common, spreadsheets comparing work and the investment for that work are also relatively commonplace. For all costs in the cumulative cost curve, however, the funds should be those that the funding organization recognizes as the agreed-on funding allocations for the project.

Considerations

Baselines are not malleable. They do not change with the vagaries of project life. While changes should be reflected with the baseline, the original baseline should remain intact. The only time a baseline should change is when it is rendered meaningless by the sheer volume of changes (either planned or unplanned). Because the baseline serves as the primary metric for evaluating performance as the project progresses, the stability of the baseline is crucial. Because it is such a critical metric, communicating it to the team through open book budgets, regular e-mail communications, or as a component of the project plan is vital to ensuring a consistent understanding of the budget.