Project Budget
The project budget is the total authorized funds allocated for the project, composed of the cost baseline plus management reserves.
Explanation
The project budget represents the total financial resources authorized for the project. It is calculated by adding management reserves to the cost baseline. The cost baseline itself is the sum of all work package cost estimates plus contingency reserves, time-phased across the project schedule.
The project budget hierarchy from bottom to top is: activity cost estimates roll up into work package cost estimates, which roll up into control account budgets, which together with contingency reserves form the cost baseline. Adding management reserves to the cost baseline gives the total project budget.
Understanding this hierarchy is essential for the exam. The project manager controls spending within the cost baseline (including contingency reserves), while management reserves require approval from the sponsor or designated authority before they can be used.
Key Points
- •Project budget = cost baseline + management reserves
- •Represents the total authorized financial resources
- •Cost baseline includes contingency reserves but not management reserves
- •The project manager controls the cost baseline; management controls management reserves
Exam Tip
Know the budget build-up: Activity estimates + Contingency reserves = Cost baseline. Cost baseline + Management reserves = Project budget.
Frequently Asked Questions
Related Topics
Cost Baseline
The cost baseline is the approved version of the time-phased project budget, excluding management reserves, used as a reference for measuring and monitoring cost performance.
Management Reserves
Management reserves are budget amounts set aside for unforeseen work within the scope of the project, intended to address unknown risks that cannot be predicted during planning.
Contingency Reserves
Contingency reserves are budget amounts allocated within the cost baseline to address identified risks that have been accepted and for which contingent or mitigating responses have been developed.
Determine Budget
Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.