Excerpt from Chapter 3 – “PREPARING THE BUDGET”

Published January 11, 2017

Project Management for Experienced Project Managers | Victor Allen and Ron May

Excerpt from Chapter 3 – “PREPARING THE BUDGET”:

Project budgeting is part of the project planning process and an
integral part of the project plan. Depending on the size of the
project, a preliminary/high-level project budget may be created
as part of developing the business case and feasibility study. This
preliminary project budget is a best guess or high-level estimate
based upon little or no information and is produced using a topdown
approach. It provides management with the opportunity to
explore the impact of the project on the resources of the company
and explore alternatives in scope, cost and timing of the project in
deciding how or whether to proceed.

Soon after the project is approved, a detailed estimate must be created
using a bottom-up approach. This can only be accomplished
after the completion of the work breakdown structure (WBS)
which determines the amount and types of resources needed for
the project and when each of those resources will be needed to
keep the project on schedule. Each resource has a cost, and those
costs can be summed for each time period. This, along with any
overheads and contingency, identifies the amount of spending
planned for each time period and the total estimated cost of the
project.