Prepare budgets

This standard is about preparing budgets. The preparation of budgets may cover the full project lifecycle or specific stages within it.

The budget can cover both cost and time.

You will need to be able to assemble the correct information and use this to set a budget. You must be able to communicate and present budgetary information in the appropriate format and justify that this meets the requirements of a defined work scope.

The starting point for this standard assumes that the scope of work and associated estimate and schedule have been approved and funding has been granted (In some organisations this may be known as sanction).

Who this standard is for
This standard is for project controls-related roles, including project controls engineers, estimators, planners, schedulers, cost controllers, risk analysts, risk managers and contract managers.

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1. identify, gather and collate the information required to produce a budget
2. develop a budget, and associated control account aligned to an approved scope of work, estimate or schedule
3. use appropriate techniques to apply contingency allocation and drawdown mechanisms
4. justify that the budget meets the project requirements
5. use a budget to produce a profile for the control and forecasting of funding
6. ensure the right level of detail is in the budget to facilitate progress measurement, control, and forecasting
7. assure the data as required
8. communicate and present budgetary information to stakeholders in an appropriate format and gain approval
9. apply cost engineering practice to recast the estimate and set the budget baseline
10. select and apply proven cost control techniques to:
    • capture actual commitment and expenditure data with appropriate use of accruals
    • integrate cost and schedule data to develop project cashflow projections and assessment of
    • value of work done over time

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1. the principles of approving scope of works
2. the principles of approving funding
3. the principles of determining when the funding is exhausted
4. key information needed to develop the initial budget and the initial baseline for scope, cost and time
5. how estimates are translated into an initial budget
6. the principles of budgeting, the main terms used, and the different approaches and techniques for establishing a budget
7. principles of contingency allocation and drawdown mechanisms in relation to both cost and time, including:
   • how the contingency is held at both contract level and budget level
   • the management of contingency
   • change control and how this impacts the contract and the budget
   • influencing factors, including applying quantitative risk analysis
8. where budgets can originate from and why they are different to contract scope and baselines, including:
   • when a budget is capped at a financial year spend profile, but the contract is contracted over a longer timeframe
   • when a budget run is aligned to a specific stakeholder
9. cost control methods, techniques and levels, and relevant financial control and funding change processes
10. the different styles and formats for communicating, presenting and justifying a budget
11. levels of authority for budget approval
12. methods to ensure the right level of detail is in the budget to facilitate progress measurement, control and forecasting
13. data assurance in relation to budgeting
14. how budgets link to other disciplines, particularly the implications of budgeting on planning
15. human factors, optimism bias and their implications for project controls
16. financial controls as relevant to project control, including:
    • taxation
    • cashflow
    • accruals
    • payment terms
    • foreign exchange rates and local requirements
17. the monitoring and reporting of suppler and contractor commitments and expenditure

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Control Account
Are management control points that integrate key cost and schedule elements of a project.

Additional Information:

Information required
Information required to establish a budget may include:

• work scope
• approved funding
• asset breakdown structures
• product breakdown structures
• work breakdown structures
• cost breakdown structures
• cost estimates
• schedules
• information and reporting requirements for all stakeholders
• estimate of time and/when resources are used

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1

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2029

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Current

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Original

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Engineering Construction Industry Training Board

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ECI PC31, ECI PC33, ECI PC36, ECI PC70

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Contract Manager, Engineer, Estimator, Risk Manager, Project Controls, Cost controller, Planner, Scheduler, Risk analyst

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Budget; budgeting; contingency allocation; drawdown planning; cost; time; funding; sanction; baseline; approval; budgetary information; profile; granted funding; cost control methods; level of detail; granularity

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