A cost baseline is a time-phased budget that serves as the basis for measuring and monitoring project performance. It is an approved document that defines the total cost of a project, broken down into smaller, more manageable components. The cost baseline is used to compare actual costs against planned costs and to assess the overall progress of the project.
The cost baseline is typically created during the planning phase of a project and is based on the project scope, schedule, and resources. It includes all costs associated with the project, including labor, materials, equipment, services, and other expenses. The cost baseline also includes any contingency funds that have been allocated for unexpected costs.
The cost baseline consists of several components that are used to track and monitor project costs. These components include: budgeted cost of work scheduled (BCWS), budgeted cost of work performed (BCWP), actual cost of work performed (ACWP), earned value (EV), and variance at completion (VAC).
The BCWS is the total amount of money allocated for a particular task or activity in the project plan. The BCWP is the amount of money actually spent on a task or activity. The ACWP is the actual amount of money spent on a task or activity. The EV is the amount of work completed relative to the amount of money spent on it. Finally, VAC is the difference between what was planned to be spent and what was actually spent.
The cost baseline provides several benefits to project managers. It helps them track and monitor project costs more effectively by providing an accurate picture of how much money has been spent on each task or activity in the project plan. This allows them to identify areas where costs are exceeding expectations and take corrective action if necessary.
The cost baseline also helps project managers make better decisions about resource allocation by providing them with an up-to-date view of how much money has been allocated for each task or activity in the project plan. This enables them to adjust their resource allocations accordingly in order to ensure that projects stay within budget.