Why Is Building a Project Baseline A Critical Strategy?
A project baseline is used to measure how performance deviates from the initial plan; baselines are a must-have for all teams to conduct meaningful performance measurements.
Author: Bob Savelson
Time to Read: 10 minutes
What Is A Project Baseline?
Project Baseline is the original scope (deliverables), cost and schedule of a project. This is also known as the “Triple Constraint”
Baseline = Approved project Plan +/- approved changes
There are 3 important components of the baseline that are derived from the Triple Constraint.
All projects are initiated with certain constraints. Natively, there are 3 key factors that cause friction with quality of a project: Cost, Time and Scope. In simple terms, every project must meet a certain quality standard while being delivered on time, within the budget, and to a fixed scope. These factors are also very interdependent, and a change in:
Cost – All projects must be completed within a certain budget. To minimize cost, the time needs to be increased, or the scope needs to be reduced.
Time – All projects must be completed within a specific time frame to be successful. To minimize time, the scope needs to be reduced and the costs need to be increased.
Scope – All projects have a certain scope or set of requirements that need to be fulfilled. The most important step to a project’s success is to define and document the scope. To increase the scope of the project, you must increase the project’s time or costs.
The idea of the “triple constraint” resides within the triangle. The best practice is to balance each of the three constraints while maintaining quality of the project.
With regards to the baseline formula, we can concur that the baseline can change. Every time a change occurs, it is important to reflect the changes in the creation of a new baseline. This relates to the “approved changes” portion of the formula. The acknowledgement of a change to a baseline is called variance analysis.
Variance analysis takes a look at the 3 factors of creating a baseline (scope, cost, and time) and identifies a baseline for each factor, therefore, making it easier to calculate the changes.
In project management it is crucial to establish a baseline with clearly defined requirements, an accurate cost structure, and scheduling estimates, before the stages of project execution and control. This must be completely defined & documented before project initiation, execution and control activities can begin.
- There Are 3 types of baselines – Schedule baseline, cost baseline and scope baseline
- Every time a change to the scope of a project occurs, the schedule and cost should be updated, thereby evolving the baseline of a project.
Why Is Baselining Important?
Establishing a baseline allows you to assess performance throughout the duration of a project. If a project is performing behind time schedule or above budget, it is time to either make changes to the baseline or add more resources by increasing time or costs.
Baselining can also help with Earned Value Management; a technique often used by project managers to measure and compare a project’s performance with its baseline.
Calculating Earned Value Requires:
Planned Value (PV) = The budgeted cost of Work Scheduled
Actual Value (AV) = Actual Costs of work performed to date
Earned value (EV) = The total project budget(PV) x % of project completion
Schedule Performance Index (SPI) = EV/PV measures the progress that is achieved to date against the progress that is initially planned.
When SPI<1, less work was achieved than planned
When SPI>1, more work was achieved than planned
Cost Performance Index (CPI) = EV/AV and measures the value of work completed against the cost of the work planned
Lastly baselining helps with future estimation accuracy. This includes a better idea of how long the project will take for completion and at what costs.
Estimated at Completion (EAC)= (Total Project Budget) / CPI
EAC is a forecast of how much the total project will cost so that you can approximate the correct allocation of resources.
Improved future estimating accuracy
Keeping an accurate record of current project estimates and actual outcome allows for application of estimates onto similar future projects. Through the use of Variance analysis, you can calculate the margin of error, which you can build onto future project estimations.
Common Project Baseline Problems/Pitfalls
Often times, when the scope, cost or timeline of an undergoing project changes, the project baseline is recreated. The reconstruction of the baseline due to variance creates ambiguity of the actual performance of the project. The information which can be used to effectively estimate future project scopes, cost, timelines, and quality, is inconsistent and decreases estimating accuracy.
Often times, employees use data from organization’s database without there being a verification process for accuracy and relevance. This absence of data verification can effectively hinder an accurate baseline and render the technique as ineffective. In order to avoid this pitfall, precautions must be taken to ensure the completeness, correctness and consistency of the data.
Project baselining strategies are, at times, rendered useless when you don’t begin your process with the end in mind.
Often times, individuals do not map out how the processed data will be used, and this creates ambiguity and incorrect choices of what data should be used or collected. Before starting a project, it is important to map out what variables you want to measure, what is its purpose, how the effect of variance will be calculated. In doing so, you will avoid having to reassess your initial baseline to correct and create changes and avoid wasting time collecting and calculating data for unnecessary variables.
Once a project is complete, the use of a baseline and the end result can help create more efficient changes to future projects that revolve around the same tasks. In today’s world, baselining has become an important component of successful project management.
- Setting the Original Project Baseline
At the initiation of any project, it is most important to set a baseline that represents your starting point of work. This is a useful method to document the change in various parameters of a project. The goal of setting a baseline is to avoid rewriting the baseline’s parameters, but to add on to it.
- Keeping a record of Past Baselines
As you progress through a project, changes ought to be made. Before each change is made, it is important to save a history of previous baselines so you can still access the old baseline for comparisons and reverting changes.
- Maintaining a Project Baseline
Once a change to a project’s scope, cost, and timeline is approved, it is now time to update the baseline by adding the new and approved scope, timelines, and budget changes. Keeping an accurate record of updates and changes to your baseline allows you to maintain it in line with the most current requirements.
Common reasons for changes to a baseline include:
- Formal Change Requests
- Customer directed rescheduling
- Reporting on a new variance
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