Establishing the Cost Performance Baseline

The next process concerns determining the cost performance baseline, which is the primary output of the Determine Budget process. The Determine Budget process aggregates the cost estimates of activities and establishes a cost performance baseline for the project that is used to measure performance of the project throughout the remaining process groups. Only the costs associated with the project become part of the authorized project budget. For example, future period operating costs are not project costs and, therefore, aren’t included in the project budget.

The cost performance baseline is the total expected cost for the project when using a budget at completion calculation, an earned value management technique. When you’re using earned value management techniques, the cost performance baseline is also known as the performance measurement baseline (PMB). We’ll talk about budget at completion and earned value management techniques in detail in Chapter 11. Remember that costs are tied to the financial system through the chart of accounts—or code of accounts—and are assigned to project activities at the work package level or to control accounts at various points in the WBS. The budget will be used as a plan for allocating costs to project activities.