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Topics: Construction, Cost Management, Financial Services
Budgets - What is the benfit of having an estimating budget and a performance budget?
Network:90



Just had a colleague of mine saying that he wished we had the ability to have a budget built from the estimate and a performance budget. This way he could track how well the project did against the performance budget instead of the budget built from the estimate. To me the budget is the budget and it is the hard line to tracker against. Can I get some different perspectives on this, please?
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Network:1698



Pete -

can you clarify what you mean by a performance budget? Is that like a trimmed down version of the full budget representing the best case scenario for project costs?

Kiron
Network:90



Kiron,

So the way it was explained to me is that a performance budget is a trued up budget of what will be actually spent because items were missed in the estimate. It sounds like more of a worse case scenario in that things were missed in the estimate.

Thanks.
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1 reply by Kiron Bondale
Sep 25, 2019 4:52 PM
Kiron Bondale
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Thanks Pete - sounds like someone is trying to put a politically correct spin on the term "current forecast" :-)

Kiron
Network:99



You have a budget which usually based on estimates at one point in time. At some point you need to baseline the approved budget, and measure actuals against the approved budget. If it appears actuals will surpass the approved/ baselined budget, then you either follow your formal approval process to increase the budget, or reduce scope and re-baseline.
Network:1698



Sep 25, 2019 10:26 AM
Replying to Pete Chamberlain
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Kiron,

So the way it was explained to me is that a performance budget is a trued up budget of what will be actually spent because items were missed in the estimate. It sounds like more of a worse case scenario in that things were missed in the estimate.

Thanks.
Thanks Pete - sounds like someone is trying to put a politically correct spin on the term "current forecast" :-)

Kiron
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1 reply by Mayte Mata-Sivera
Sep 25, 2019 6:00 PM
Mayte Mata-Sivera
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Kiron, you read my mind!
Network:9801



Sep 25, 2019 4:52 PM
Replying to Kiron Bondale
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Thanks Pete - sounds like someone is trying to put a politically correct spin on the term "current forecast" :-)

Kiron
Kiron, you read my mind!
Network:364



I can appreciate that sentiment. We often have expectations built on the initial (and often wildly optimistic) estimate, and then lower expectations after we develop the fully defined SOW.

I remember once asking a director during a PD planning exercise whether they wanted a ROM or a commitment level estimate. Their response is they wanted a commitment level ROM. I took a mental note to plan for a rocky road of budget issues.
Network:90



After discussing the issue more, I pointed that out that it sounds more like a forecast and where would the additional funds come from to support it. They saw my point after that. Thank you to everyone on this. I wanted to make sure I wasn't making a wrong statement on a concept I haven't come across yet.
Network:1937



When you talked about estimations my recommendation is taking a closer look to Barry Bohem´s Cone of Uncertainty. It will help a lot. On the other side, what you control along the project are project costs that you have to compare with the forecasted budged or in other words with the money you still have available to spend in your project.
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1 reply by Pete Chamberlain
Sep 30, 2019 10:07 AM
Pete Chamberlain
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Thanks Sergio, I will take a look at it.
Network:90



Sep 27, 2019 5:28 AM
Replying to Sergio Luis Conte
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When you talked about estimations my recommendation is taking a closer look to Barry Bohem´s Cone of Uncertainty. It will help a lot. On the other side, what you control along the project are project costs that you have to compare with the forecasted budged or in other words with the money you still have available to spend in your project.
Thanks Sergio, I will take a look at it.

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