Arriving at the necessary outputs for your budget determination is important information to know for the PMP Certification Exam. After you balance the scope, schedule, budget, risk, and funding limitations, you have a viable cost baseline, your project budget, and your funding requirements. You use that cost baseline to measure, monitor, and control your overall cost performance on the project.

When using EV (earned value) management, the cost performance baseline is referred to as the performance measurement baseline.

Cost Baseline. The approved version of the time-phased project, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis for comparison to actual results.

Performance measurement baseline (PMB). An approved integrated scope-schedule-cost plan for the project work against which project execution is compared to measure and manage performance. The PMB includes contingency reserve but excludes management reserve.

Here, you see a cost baseline for the playground installation.

A cost baseline graph for a project.

The difference between the cost baseline and the project budget is management reserves. You will measure performance against the baseline; however, you will need the management reserve as part of the project budget to address unforeseen risks.

The project funding requirements outline the amount of total funding needed for the project. You might see them overlaid on the cost baseline for each time period. Although project expenditures usually occur relatively smoothly, funding often occurs in chunks. Now, you will see the cost baseline with funding occurring in a stair-step fashion.

Graph shows the funding requirements and cost baseline for a project.

Another way of showing the funding needs is to show the build-up from work packages to control accounts to the cost baseline, then the project budget and, finally, the total funding requirements. Total funding requirements include the cost baseline + management reserve.

The work in the WBS plus contingency reserves makes up the cost baseline. The addition of the management reserve determines the project budget.

A project budget divided into all the costs.

After the cost baseline and funding requirements are established, you might need to update your schedule, risk register, and other project documents.

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