• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Site-Logo
Phone 703-910-2600

Ten Six Consulting

Project and Earned Value Management, Primavera P6 & Deltek Cobra & Acumen Services

703-910-2600
  • Training Classes
    • Primavera P6 Training
    • Deltek Training
    • Earned Value Management Training
    • Project Management Training
    • Open Training Class Dates
  • Scheduling Services
  • Earned Value Mgmt. Services
    • RFP Support
    • Your EVM System
    • Certification
    • Data Analysis and Reporting
    • Post Contract Support
    • Staff Augmentation
    • WBS Guidelines for Government Acquisition Programs (MIL-STD 881D)
  • Tools
    • Primavera P6
      • Knowledge Transfer, Mentoring and Coaching
      • BI Publisher Services
    • Primavera Unifier
    • Deltek Cobra
      • Knowledge Transfer, Coaching and Mentoring
      • Staff Augmentation
    • Microsoft Project to Primavera P6 Conversion Services
    • Microsoft Project
      • Building an Integrated Master Schedule (IMS)
      • Integrating Microsoft Project with Deltek Cobra
      • Migrating From Microsoft Project To Oracle Primavera P6
  • Blog
    • Deltek Acumen
    • Deltek Cobra
    • Earned Value Mgmt
    • Microsoft Project
    • PMO
    • Primavera P6
    • Project Management
    • Risk Management
  • Clients
  • Contact Us
  • Training Classes
    • Primavera P6 Training
    • Deltek Training
    • Earned Value Management Training
    • Project Management Training
    • Open Training Class Dates
  • Scheduling Services
  • Earned Value Mgmt. Services
    • RFP Support
    • Your EVM System
    • Certification
    • Data Analysis and Reporting
    • Post Contract Support
    • Staff Augmentation
    • WBS Guidelines for Government Acquisition Programs (MIL-STD 881D)
  • Tools
    • Primavera P6
      • Knowledge Transfer, Mentoring and Coaching
      • BI Publisher Services
    • Primavera Unifier
    • Deltek Cobra
      • Knowledge Transfer, Coaching and Mentoring
      • Staff Augmentation
    • Microsoft Project to Primavera P6 Conversion Services
    • Microsoft Project
      • Building an Integrated Master Schedule (IMS)
      • Integrating Microsoft Project with Deltek Cobra
      • Migrating From Microsoft Project To Oracle Primavera P6
  • Blog
    • Deltek Acumen
    • Deltek Cobra
    • Earned Value Mgmt
    • Microsoft Project
    • PMO
    • Primavera P6
    • Project Management
    • Risk Management
  • Clients
  • Contact Us

4 Events That Prompt A Project Budget Change

You are here: Home / Project Management / 4 Events That Prompt A Project Budget Change

July 22, 2022 By Ten Six

Events That Prompt A Project Budget ChangeProject Budget Change Events

The reason why many teams use earned value management methods is that they give accurate performance management information about a project. The metrics integrate schedule and budget to provide a rounded way of looking at progress, far more accurate than a simple percent complete could ever be.

Good data out of your EV reports relies on good data going in. And it all starts with the performance measurement baseline (PMB). During the project, the team use the PMB to track against. They compare actual performance to planned performance to see whether work is progressing as expected.

But what happens when the PMB stops being useful? The progress tracking data also stops adding value to the team. If they can’t use it reliably because the costs or the schedule no longer reflect the reality of the work, then earned value management becomes a tick box exercise instead of a core part of project control.

The PMB can stop being useful for a couple of reasons, and one is that the financial aspect of the time-phased budget is no longer reliable. If you have enough information to know that you are tracking against something that is wrong, it’s time to look again at what your budget at completion (BAC) is likely to be.

Here are four project management events that prompt a change to the budget.

1. Re-baselining is required

First, let’s talk a little more about the scenario mentioned above, where the PMB stops being useful. If the scope changes, or the project management approach changes during the work, there might be a significant enough impact on the performance measurement baseline to warrant a re-forecast of the budget.

For example, let’s say that an error was identified in the assumptions used to forecast a large portion of the building work required on a project. The project will actually cost less than forecast. The cost variance to the performance baseline looks positive: that’s good news, the project is spending less than expected. But that performance data is simply masking reality. It’s not helpful to accept that level of error as the earned value management data produced from the project is incorrect. It does not reflect actual performance based on the information known now.

In this situation, rebaselining would be worthwhile. That would re-establish the PMB as a reliable way of measuring performance. Use change control to move the project through the process and establish a new baseline.

2. Scope changes

A change to requirements is very likely to mean a change to the budget. The financial impact of the change should be considered as part of the change control process. By the time the change is approved, the project team should have a good idea of what the difference that will make to the forecasted costs.

The easiest thing to do when a work package is removed from scope is to adjust the budget down based on the budget allocated to that work package. However, there might be reasons why it is not prudent to do that. For example, on a software project regression testing might be required if some of the work has already been started or planned for at the point it is removed. This will ensure that the reduced requirements work well without the removed element.

Make sure all factors are considered and that you are making changes to the baseline within the guidelines of your project management method.

3. Contract changes

Contracts may evolve over the life of the project. The guidance in DOE G 413.3-10B, Integrated Project Management Using the Earned Value Management System, helpfully points out that contract modifications may result in a budget replan. For example, if the funding profiles change as a result of modifying a contract, work might have to be sped up or slowed down to meet the new requirements.

If contracts on your project change, take a look at the budget phasing and see if there is any impact. It might be worth a replan to ensure milestones can be met. Earned value management training will prepare your team to make the required changes.

4. Change to management reserve

The management reserve budget exists to address risks and offset the impact of uncertainty. It isn’t there to pad the amount allocated to work that was poorly estimated. That said, if management reserves are required – for example to fund a period of rework that results from a realized risk – it is appropriate to amend the budget.

Management reserves are moved to the performance measurement baseline. That would necessitate a change to the budget so that the PMB reflects the current status and the increased or reduced budget.

All these situations would warrant making a formal change to the project budget. However, the financial management history of the project is important to maintain. Keep records of what changes are made to the project budget. These are useful input for future estimating sessions. They also ensure the integrity of the project data and allow for auditing. You might be grateful for them on your next project!

Primary Sidebar

  • This field is for validation purposes and should be left unchanged.
  • Facebook
  • LinkedIn
  • Twitter

Categories

  • Deltek Acumen
  • Deltek Cobra
  • Earned Value Mgmt
  • Microsoft Project
  • PMO
  • Primavera P6
  • Project Management
  • Risk Management
CONTACT US

Footer

Upcoming Classes

Primavera P6 Professional Fundamentals
Primavera P6 EPPM Fundamentals
Primavera P6 EPPM Administrator
Primavera P6 BI Publisher Fundamentals
Deltek Cobra Fundamentals
Deltek Cobra Advanced
Deltek Acumen Fuse
Deltek Acumen Risk

  • This field is for validation purposes and should be left unchanged.
  • Facebook
  • LinkedIn
  • Twitter
  • Consulting Services
  • About Ten Six
  • Contact Us
  • Blog

Copyright © 2023 Ten Six Consulting, LLC · 703.910.2600

  • Training Classes
    ▼
    • Primavera P6 Training
    • Deltek Training
    • Earned Value Management Training
    • Project Management Training
    • Open Training Class Dates
  • Scheduling Services
  • Earned Value Mgmt. Services
    ▼
    • RFP Support
    • Your EVM System
    • Certification
    • Data Analysis and Reporting
    • Post Contract Support
    • Staff Augmentation
    • WBS Guidelines for Government Acquisition Programs (MIL-STD 881D)
  • Tools
    ▼
    • Primavera P6
      ▼
      • Knowledge Transfer, Mentoring and Coaching
      • BI Publisher Services
    • Primavera Unifier
    • Deltek Cobra
      ▼
      • Knowledge Transfer, Coaching and Mentoring
      • Staff Augmentation
    • Microsoft Project to Primavera P6 Conversion Services
    • Microsoft Project
      ▼
      • Building an Integrated Master Schedule (IMS)
      • Integrating Microsoft Project with Deltek Cobra
      • Migrating From Microsoft Project To Oracle Primavera P6
  • Blog
    ▼
    • Deltek Acumen
    • Deltek Cobra
    • Earned Value Mgmt
    • Microsoft Project
    • PMO
    • Primavera P6
    • Project Management
    • Risk Management
  • Clients
  • Contact Us