6 Tools And Techniques For Determine Budget For Projects
In my previous article, I have discussed some of the tools that can be used when it comes to managing a project for organisations and determining the budget for projects. In this article, I want to look at some of the tools and techniques that can be used to determine the budget for projects. Follow me as we look at this together in this article.
Now the techniques…
#1 Expert Judgement
One of the techniques that can be used to determine the budget for projects is expert judgement. You have to discuss with experts and get there opinions concerning your deliverables. They will be able to advise you on the best way to go about it. Some of the areas where expert judgment can be sought from include: previous similar projects, the information in the industry, financial principles as well as funding requirements and sources for projects.
#2 Cost estimation
Cost estimates are aggregated by work packages in accordance with the WBS. The work package cost estimates are then aggregated for the higher component levels of the WBS and ultimately, for the entire project.
#3 Data Analysis
A Data Analysis technique that can be used in the Determine Budget process includes but is not limited to reserve analysis, which can establish the management reserves for the project. Management reserves are an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within the scope of the project.
Management reserves are intended to address the unknown that can affect a project. The management reserve is not included in the cost baseline but is part of the overall project budget and funding requirements.
When an amount of management reserves is used to find unforeseen work, the amount of management reserve used is added to the cost baseline, thus requiring an approved change to the cost baseline.
#4 Historical Information Review
Reviewing historical information can assist in developing estimates or analogous estimates. Historical information may include project characteristics or parameters to develop mathematical models to predict total project costs. Such models may be simple or complex.
Both the cost and accuracy of the analogous and parametric model can vary widely. They are most likely to be reliable when: Historical information used to develop the model is accurate. It also has parameters used in the model are readily quantifiable. Also, make sure the model is scalable, such that they work for large projects, similar projects, and phases of a project.
#5 Funding limit reconciliation
The expenditure of funds should be reconciled with any funding limits on the commitment for the project. A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. This is accomplished by placing imposed dates constraints for work into the project schedule.
#6 Financing
Financing entails acquiring funding for projects. It is common for long-term infrastructure, industrial and public services projects to seek external sources of funds. If a project is funded externally, the funding may have certain requirements that are required to be met.
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