{"id":59236,"date":"2021-09-02T14:00:00","date_gmt":"2021-09-02T19:00:00","guid":{"rendered":"https:\/\/www.projectmanager.com\/?p=59236"},"modified":"2026-04-27T09:27:56","modified_gmt":"2026-04-27T14:27:56","slug":"cost-baseline-project-management","status":"publish","type":"post","link":"https:\/\/www.projectmanager.com\/blog\/cost-baseline-project-management","title":{"rendered":"What Is a Cost Baseline in Project Management? A Quick Guide"},"content":{"rendered":"<p>Most projects have stakeholders that expect a return on their investment. For that to happen, the project must meet its deadline and stay within budget. To create a project budget, you first need to create a cost baseline so you can compare planned spend to actual spend.<\/p>\n<p>It\u2019s with this cost baseline that you can make cost estimates for each task of your project and see if you\u2019re on target or overspending. Let\u2019s take a moment to fully understand this cost management concept and how you can use it to keep your <a href=\"\/guides\/project-tracker\">project on track<\/a>.<\/p>\n<h2>What is a Cost Baseline in Project Management?<\/h2>\n<p>A cost baseline is the budget that has been approved for a project, broken down into a list of salaries, materials, equipment and more. It\u2019s the sum of the cost estimates for all the tasks on your project schedule. Once you have a cost baseline, you need to add a management reserve, which is a portion of the <a href=\"\/training\/create-and-manage-project-budget\">project budget<\/a> that\u2019s used as a contingency reserve for management control and unexpected costs. Those two elements make up your project budget.<\/p>\n<p>Creating a budget is the first step in tracking your expenses. Like any project management baseline, a cost baseline is used to compare actual spending versus <a href=\"\/blog\/cost-estimation-for-projects\">cost estimates<\/a>.<\/p>\n<div class=\"template-download-holder\">\n\t<div class=\"template-download-image-holder\">\n\t\t<img loading=\"lazy\" decoding=\"async\" width=\"1600\" height=\"900\" src=\"\/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel.png\" class=\"attachment-large size-large\" alt=\"Project Budget Template For Excel\" srcset=\"\/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel.png 1600w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-600x338.png 600w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-300x169.png 300w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-768x432.png 768w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-1536x864.png 1536w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-450x253.png 450w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-384x216.png 384w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Template-for-Excel-800x451.png 800w\" sizes=\"auto, (max-width: 1600px) 100vw, 1600px\" \/>\t<\/div><p class=\"intro\">Get your free<\/p>\n<h3>Project Budget Template<\/h3>\n<p class=\"subtitle\">\n\tUse this free Project Budget Template  for Excel to manage your projects better.<\/p>\n\t\t<button type=\"button\" data-file-id=\"68132\" data-categoryname=\"In blog post\" class=\"button green template-lightbox-trigger-68132\">Download Excel File<\/button>\n\t<\/div> \n\n<p>Ideally, the cost estimates and actual project costs numbers should match or, better yet, the actual costs should be lower than the cost baseline. If the actual costs are higher, then you\u2019re overspending. This throws up a red flag that your project is in danger of failing due to exceeding the budget.<\/p>\n<p>You want to set the baseline between the <a href=\"\/guides\/project-planning\">project planning phase<\/a> and the start of executing the project. The budget baseline shouldn\u2019t be touched unless there is a major change in the project scope, resources or cost estimates; for example, delays, budget overrun or loss of key resources. The budget baseline can only be changed through a change request.<\/p>\n<h2>What&#8217;s Included in a Project Cost Baseline?<\/h2>\n<p>A cost baseline is the authorized spending plan across the life cycle of the project. It includes every project activity, task and associated <a href=\"\/guides\/resource-management\">resources<\/a> that are needed for a project.<\/p>\n<p>This includes any contingency reserve funds that are set aside to deal with potential issues that you identify in a <a href=\"\/training\/how-to-analyze-risks-project\">risk analysis<\/a>. These issues can put the project behind schedule, impact the quality of its deliverables and, of course, make you go over budget.<\/p>\n<h2>Why Are They Important?<\/h2>\n<p>Setting a cost baseline is important because keeping to your project budget is important. Going over budget is a sure sign that your project is heading in the wrong direction. Miss the mark with the budget, and you\u2019re going to have some unhappy stakeholders.<\/p>\n<p>The cost baseline is a bottom-line issue, but it\u2019s also a way to assess <a href=\"\/blog\/calculate-cost-variance\">cost variance<\/a>, cost performance and planned effort versus actual effort. Without a baseline, you have nothing to measure your spending against and control costs. Few things are more important than cost management when managing a project.<\/p>\n<p>Using project management software helps you track costs in your project. <a href=\"https:\/\/www.projectmanager.com\">ProjectManager<\/a> is an award-winning cost management software that lets you set a project baseline and compare your actual costs to your cost estimates. Try ProjectManager free today!<\/p>\n<figure id=\"attachment_63415\" aria-describedby=\"caption-attachment-63415\" style=\"width: 1553px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/www.projectmanager.com\/freetrial?edition=d&amp;cycle=year\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-63415 size-full\" src=\"\/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1.jpg\" alt=\"ProjectManager baseline\" width=\"1553\" height=\"834\" srcset=\"\/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1.jpg 1553w, \/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1-600x322.jpg 600w, \/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1-300x161.jpg 300w, \/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1-768x412.jpg 768w, \/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1-1536x825.jpg 1536w, \/wp-content\/uploads\/2022\/07\/Construction-Gantt-Task-Info-CTA-BUTTON-1-450x242.jpg 450w\" sizes=\"auto, (max-width: 1553px) 100vw, 1553px\" \/><\/a><figcaption id=\"caption-attachment-63415\" class=\"wp-caption-text\">Make a baseline for your schedule with our online Gantt charts. <strong><a href=\"\/software\/gantt-chart\">Learn more<\/a><\/strong><\/figcaption><\/figure>\n<h2>How to Create a Cost Baseline<\/h2>\n<p>Creating a cost baseline begins with estimating the total project costs. This includes the tasks, and the resources needed to accomplish them. The easiest way to do this is task by task. Estimate the cost of labor, materials, etc., then add it all up. This is the initial estimated budget for the project.<\/p>\n<p>Bear in mind that the true cost of any task might not be clear during the planning stage of the project. You could come to find that material costs have risen or other unforeseen additional costs. You might also need more time to accomplish your project, which also impacts costs.<\/p>\n<p>That\u2019s why it\u2019s important to have a <a href=\"https:\/\/www.projectmanager.com\/blog\/contingency-reserve\">contingency reserve<\/a> earmarked in the budget to address project risks. Once this is all in place, you\u2019ll want to manage your project with project management software. That way, you can set a <a href=\"https:\/\/www.projectmanager.com\/blog\/project-baseline\">project baseline<\/a> and automatically calculate project variance as you work.<\/p>\n<p><strong>Related:<\/strong> <a href=\"https:\/\/www.projectmanager.com\/templates\/construction-estimate-template\">Free Cost Estimate Template<\/a><\/p>\n<h2>What&#8217;s the Difference Between a Project Budget and a Cost Baseline?<\/h2>\n<p>The confusion is understandable because both are <a href=\"\/training\/basics-project-cost-management\">cost management<\/a> tools, but a cost baseline is not the same as a project budget. Instead, the cost baseline is the first step to create a project budget.<\/p>\n<p>First, you need to gather all the cost estimates for each project task and add a <a href=\"https:\/\/www.projectmanager.com\/blog\/management-reserve\">management reserve<\/a> for unexpected expenses. Once you have those, you can create a project budget that includes all the funds required to execute your project. When your project starts, the project budget will be used to approve project costs and keep track of expenses while the cost baseline will be used to compare the actual costs of the project against the cost estimates that were first registered in the cost baseline.<\/p>\n<p>The cost baseline is also used as a <a href=\"\/blog\/project-metrics\">metric<\/a> to measure cost performance. Your budget is the best estimate for what you expect the cost of the project to be. Therefore, you can call the cost baseline the budget baseline, because it\u2019s a ruler you use to measure cost performance.<\/p>\n<p>A cost baseline is used to measure the budget while creating the budget itself is part of the project planning process. Budgeting takes place near the beginning, while cost baselines are a cost management tool to measure progress during the <a href=\"\/blog\/project-execution\">execution<\/a>.<\/p>\n<h2>Project Budget Template<\/h2>\n<p>This free <a href=\"\/templates\/project-budget-template\">project budget template<\/a> for Excel lets you list down all your project tasks and the costs related to them such as labor, equipment and materials costs. On top of that, it lets you keep track of both your planned and actual costs and it automatically calculates the difference between them so you know whether you&#8217;re keeping to your cost baseline or not.<\/p>\n<figure id=\"attachment_61331\" aria-describedby=\"caption-attachment-61331\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><a href=\"\/templates\/project-budget-template\"><img loading=\"lazy\" decoding=\"async\" width=\"1477\" height=\"411\" class=\"aligncenter size-full wp-image-61331\" src=\"\/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot.jpg\" alt=\"project budget template\" srcset=\"\/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot.jpg 1477w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot-600x167.jpg 600w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot-300x83.jpg 300w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot-768x214.jpg 768w, \/wp-content\/uploads\/2020\/09\/Project-Budget-Screenshot-450x125.jpg 450w\" sizes=\"auto, (max-width: 1477px) 100vw, 1477px\" \/><\/a><figcaption id=\"caption-attachment-61331\" class=\"wp-caption-text\">Free Project Budget template. <a href=\"https:\/\/www.projectmanager.com\/templates\/project-budget-template\">Download now<\/a><\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<h2>How ProjectManager Sets Your Budget Baseline<\/h2>\n<p>Creating a cost baseline is one of the most effective ways you can measure the cost performance of your project. <a href=\"\/\">ProjectManager<\/a> is a cloud-based project management software that collects your project data in real-time, giving you the information you need to make informed cost management decisions and keep your project operating as planned.<\/p>\n<h3>Plan on Gantt Charts<\/h3>\n<p>Before you can set a cost baseline, you need to make a project plan. <a href=\"\/software\/gantt-chart\">ProjectManager&#8217;s online Gantt chart<\/a> lets you chart your work on a visual timeline, link dependencies and set milestones. Once done, you can filter for the critical path and set a schedule baseline to measure your progress. All of this can be seen on the Gantt chart, which can be shared with the entire project team.<\/p>\n<a href=\"\/software\/gantt-chart\"><img loading=\"lazy\" decoding=\"async\" width=\"1568\" height=\"818\" class=\"aligncenter size-full wp-image-61515\" src=\"\/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS.jpg\" alt=\"ProjectManager's Gantt chart, showing its schedule baseline features\" srcset=\"\/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS.jpg 1568w, \/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS-600x313.jpg 600w, \/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS-300x157.jpg 300w, \/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS-768x401.jpg 768w, \/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS-1536x801.jpg 1536w, \/wp-content\/uploads\/2022\/03\/Gantt_Marketing_Wide_Zoom-175_WBS-450x235.jpg 450w\" sizes=\"auto, (max-width: 1568px) 100vw, 1568px\" \/><\/a>\n<h3>Track Progress in Real-Time on Dashboards<\/h3>\n<p>For a high-level view of the project, you can use <a href=\"\/software\/dashboard\">ProjectManager&#8217;s real-time dashboard.<\/a> The dashboard is set up and ready to measure project costs, project variance (and much more!), all automatically displayed in easy-to-read graphs and charts.<\/p>\n<a href=\"\/software\/dashboard\"><img loading=\"lazy\" decoding=\"async\" width=\"1568\" height=\"816\" class=\"aligncenter size-full wp-image-61502\" src=\"\/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150.jpg\" alt=\"ProjectManager's project management dashboard, ideal to keep track of a cost baseline\" srcset=\"\/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150.jpg 1568w, \/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150-600x312.jpg 600w, \/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150-300x156.jpg 300w, \/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150-768x400.jpg 768w, \/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150-1536x799.jpg 1536w, \/wp-content\/uploads\/2022\/03\/Dashboard_Construction_Wide_Zoom-150-450x234.jpg 450w\" sizes=\"auto, (max-width: 1568px) 100vw, 1568px\" \/><\/a>\n<h3>Create Reports on Variance Instantly<\/h3>\n<p>Stakeholders want to know that you\u2019re staying on budget. <a href=\"\/software\/reporting\">ProjectManager has one-click reports<\/a> that display project and portfolio status. There\u2019s also a project variance report. All reports can be filtered to show only the information you want to see.<\/p>\n<a href=\"\/software\/reporting\"><img loading=\"lazy\" decoding=\"async\" width=\"1568\" height=\"818\" class=\"aligncenter size-full wp-image-61536\" src=\"\/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report.jpg\" alt=\"ProjectManager's status report, a project management tool to keep track of project costs\" srcset=\"\/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report.jpg 1568w, \/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report-600x313.jpg 600w, \/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report-300x157.jpg 300w, \/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report-768x401.jpg 768w, \/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report-1536x801.jpg 1536w, \/wp-content\/uploads\/2022\/03\/Reports_Wide_Zoom-150_Portfolio-Status-Report-450x235.jpg 450w\" sizes=\"auto, (max-width: 1568px) 100vw, 1568px\" \/><\/a>\n<p><em>ProjectManager is award-winning software that organizes your tasks, teams and projects so you can stay on budget and schedule. ProjectManager&#8217;s collaborative platform connects teams and gives managers the transparency they need to keep everyone on target. Join tens of thousands of teams from NASA to Ralph Lauren who use ProjectManager to deliver on time and within budget. <a href=\"\/pricing\">Try ProjectManager free today.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most projects have stakeholders that expect a return on their investment. For that to happen, the project must meet its&#8230;<br \/><a class=\"excerpt-read-more button blue\" href=\"https:\/\/www.projectmanager.com\/blog\/cost-baseline-project-management\">Read More<\/a><\/p>\n","protected":false},"author":69,"featured_media":59440,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_yoast_wpseo_meta-robots-noindex":0,"_yoast_wpseo_canonical":"","_yoast_wpseo_opengraph-title":"","_yoast_wpseo_opengraph-description":"","_yoast_wpseo_opengraph-image":"","_yoast_wpseo_twitter-title":"","_yoast_wpseo_twitter-description":"","head_code_insert":"","footnotes":""},"categories":[193,131],"tags":[],"class_list":["post-59236","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-project-management","category-blog"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.3 (Yoast SEO v28.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What Is a Cost Baseline in Project Management? - ProjectManager<\/title>\n<meta name=\"description\" content=\"Using a cost baseline is how you measure budget performance and keep your project on track. 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Learn why it&#039;s so important.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.projectmanager.com\/blog\/cost-baseline-project-management\" \/>\n<meta property=\"og:site_name\" content=\"ProjectManager\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/projectmanage\/\" \/>\n<meta property=\"article:published_time\" content=\"2021-09-02T19:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-27T14:27:56+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.projectmanager.com\/wp-content\/uploads\/2021\/09\/210830_Blog_Feature_Budgeting.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Marshall Simmons\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Marshall Simmons\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.projectmanager.com\\\/blog\\\/cost-baseline-project-management#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.projectmanager.com\\\/blog\\\/cost-baseline-project-management\"},\"author\":{\"name\":\"Marshall Simmons\",\"@id\":\"https:\\\/\\\/www.projectmanager.com\\\/#\\\/schema\\\/person\\\/70dff386ee1866ea13fb6def6f251714\"},\"headline\":\"What Is a Cost Baseline in Project Management? 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