Cost Budgeting

The PMBOK^® Guide has this to say about cost budgeting: “Cost budgeting involves aggregating the estimated costs of individual schedule activities or work packages to establish a total cost baseline for measuring performance.”^[3]

In traditional project planning, work by the team is not authorized until after cost budgeting has taken place. In agile, some work must be authorized prior to project kickoff so that the team can at least engage in release planning; the resulting release plan will then establish the cost baseline and subsequent budget. Once the team comes to consensus on the release plan, and the other associated costs are known, the project manager and/or the budget task force can aggregate the cost per iteration to get the cost baseline. The idea is that the estimates will be better by having the entire team involved in planning, potentially offsetting these costs with higher-quality estimates and team consensus on the plan.