According to the PMBOK Guide, a project budget is the total projected costs needed to complete a project over a defined period of time. It’s used to estimate what the costs of the project will be for every phase of the project. To create a project budget, the project manager should first define the project scope and then create a cost breakdown structure, which allows them to pinpoint all the costs in a project. One of the methods to create a cost breakdown structure is to decompose the project into features, which are the deliverables or outputs that provide value to the customer or stakeholder. Each feature can be further decomposed into tasks or activities, which are the work packages that need to be performed to produce the feature. By breaking down the project into features and tasks, the project manager can estimate the cost for each task based on the resources, materials, and equipment required. One of the techniques to estimate the cost for each task is to use the velocity of the team, which is the rate at which the team can deliver value in a given time period. The velocity of the team can be measured by the number of features, tasks, or units of work that the team can complete in a fixed iteration or cycle. By multiplying the velocity of the team by the value of each feature or task, the project manager can obtain the estimate for each task. By adding up the estimates for all the tasks, the project manager can obtain the estimate for the whole project. This method of estimating the project budget is suitable for projects that use an adaptive or agile approach, where the scope, schedule, and cost are flexible and responsive to changes and uncertainties. By decomposing the project into features and using the velocity of the team, the project manager can prioritize the most valuable features and deliver them in short iterations, while adjusting the estimates as the project progresses. This can help the project manager to manage the project budget more effectively and efficiently. References:
PMBOK Guide, 7th edition, Chapter 2: Project Performance Domains, Section 2.1: Project Delivery Approach, pp. 23-251
PMBOK Guide, 7th edition, Chapter 4: Tailoring, Section 4.2: Tailoring Considerations, pp. 51-531
PMBOK Guide, 7th edition, Chapter 5: Scope, Section 5.2: Plan Scope, pp. 67-691
PMBOK Guide, 7th edition, Chapter 6: Schedule, Section 6.2: Plan Schedule, pp. 83-851
PMBOK Guide, 7th edition, Chapter 7: Cost, Section 7.2: Plan Cost, pp. 103-1051
How to Estimate Project Cost in 8 Steps (Accurately) - Toggl2
