PMP Certification: Determine Budget (based on PMBOK® Guide, 6th Edition)


  • WHAT Determine Budget Is. Determine Budget implies aggregating the individual activity cost estimates into a total project cost and applying the project schedule to establish the costs timing. The resulting cost baseline is used to measure the performance of the project throughout the remaining process groups.
  • WHY Determine Budget Is Important. The cost baseline, output of the Determine Budget process, reports a detailed budget that shows costs and timelines for each work package or activity.
  • WHEN Determine Budget Is Executed. Project managers must complete the other Planning processes—such as the Create WBS, Define Activities, and Estimate Activity Resources—before working on Determine Budget because some of their outputs become the inputs to this process. On the other hand, they can perform the Estimate Costs and Determine Budget processes at the same time.
  • HOW Determine Budget Operates.
pmp 2018 pmp certification determine budget pmbok guide 6th edition tipsographic main

Determine Budget 101

What Does Determine Budget Involve and When Do You Perform It in a Project Life Cycle?


  • WHAT Determine Budget Is. Determine Budget implies aggregating the individual activity cost estimates into a total project cost and applying the project schedule to establish the costs timing. The resulting cost baseline is used to measure the performance of the project throughout the remaining process groups.
  • WHY Determine Budget Is Important. The cost baseline, output of the Determine Budget process, reports a detailed budget that shows costs and timelines for each work package or activity.
  • WHEN Determine Budget Is Executed. Project managers must complete the other Planning processes—such as the Create WBS, Define Activities, and Estimate Activity Resources—before working on Determine Budget because some of their outputs become the inputs to this process. On the other hand, they can perform the Estimate Costs and Determine Budget processes at the same time.
  • HOW Determine Budget Operates.
InputsTools and techniquesOutputs
  1. Project management plan
    • Cost management plan
    • Resource management plan
    • Scope baseline
  2. Project documents
    • Basis of estimates
    • Cost estimates
    • Project schedule
    • Risk register
  3. Business documents
    • Business case
    • Benefits management plan
  4. Agreements
  5. Enterprise environmental factors
  6. Organizational process assets
  1. Expert judgment
  2. Cost aggregation
  3. Data analysis
    • Reserve analysis
  4. Historical information review
  5. Funding limit reconciliation
  6. Financing
  1. Cost baseline
  2. Project funding requirements
  3. Project documents updates
    • Cost estimates
    • Project schedule
    • Risk register

Source: PMBOK® Guide, 6th ed., Chapter 7, section 7.3, p. 248.

Determine Budget Key Terms

What Are the Key Terms to Fully Understand the Process of Determining Budget?


  • project management professional certification 2018 study guide free online prep tipsographicCost Aggregation. A technique for summing lower level cost estimates for each work package to arrive at a total cost estimate for higher-level deliverables.
  • Cost Baseline. A time-phased plan for when funds will be disbursed on a project, baseline against which  measuring project cost performance.  It includes activity costs plus contingency reserves, work package costs plus contingency reserves, and management reserves for cost baseline.
  • Funding Limit Reconciliation. A project must reconcile funding requirements with any funding limitation or constraint originating from the company’s fiscal calendar.
  • Project Funding Requirements. The requirements for funding over the course of the project, derived from the cost baseline.

Determine Budget Tips

What Are the Best Tips to Answer Correctly the PMP Certification Exam Questions on Determine Budget Process?


  • Cost Baseline Vs. Funding Requirements. At the end of the project, the difference between cost baseline and funding requirements is the management reserve. Expressed as Funding requirements = cost baseline + management reserve.
  • Funding Release. Usually, the project’s funds are released incrementally over the life of the project; monthly, quarterly, or annually but not all at once.
  • Large Projects. Large projects might have more than one cost baseline. For PMP example, you might be required to track human resources costs, material costs, and contractor costs separately.

Click here for a detailed analysis of each project management process group and knowledge area.

SOURCES: Project Management Institute (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 6th ed. Newtown Square: Project Management Institute.

pmbok 6th edition, how to do pmp certification, how do i get a pmp certification, how do you get a pmp certification, how to get pmp certification online, get pmp certified, how to get pmp certification, getting pmp certified, where to get pmp certification, get pmp certification online, how to get my pmp certification, pnp certification, project management certification test, project management certification questions, project management certification training, pmp 2018.

Recommended for You

  •  
    4
    Shares
  • 4
  •  
  •  
  •  
  •  

Project Management Glossary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

“PMP”, “PMBOK”, “PMI-ACP” and “PMI” are registered trademarks of the Project Management Institute, Inc. All rights reserved.