A baseline cost estimate refers to the initial or original estimate of the total cost required to complete a project, task, or activity. It serves as a benchmark or point of reference against which the actual cost performance and progress of the project are measured. A baseline cost estimate is typically determined during the planning phase of a project, when the scope, objectives, and work breakdown structure (WBS) are defined.
The baseline cost estimate includes all anticipated costs associated with the project, including direct costs such as labor, materials, and equipment, as well as indirect costs such as overhead and contingency expenses. It accounts for both fixed and variable costs that are required to accomplish the project objectives. The estimate is based on various cost estimating techniques, historical data, expert judgment, and any available supporting information.
Once the project execution begins, the baseline cost estimate is used as a reference to monitor and control cost performance. Any deviations or variances from the baseline estimate are closely monitored, and corrective actions are taken to bring the project back on track. The baseline cost estimate provides stakeholders with a realistic budget and helps in making informed decisions regarding project funding, resource allocation, and schedule management.
In summary, a baseline cost estimate is an initial estimate of the total project cost that serves as a reference point to measure cost performance and manage project finances throughout its lifecycle.
