What is a cost baseline and how is it used?

• A. The baseline plan for procurement activities only.
• B. A rough order of magnitude of costs.
• C. The aggregate contingency fund for risk responses.
• D. The authorized time-phased budget against which project performance is measured; used in earned value management and performance reporting.

Answer: (D)

The cost baseline is the approved, time-phased budget that serves as the reference point for measuring cost performance. It comes from the approved project budget and is laid out across time so you can see when costs are expected to occur. In earned value management this baseline enables the calculations of planned value, earned value, and actual cost, which in turn produce cost variances, the cost performance index, and forecasted final costs. It’s the stable benchmark used for performance reporting and project forecasting, maintained through formal change control and excluding management reserves. This makes it broader and more precise than a rough order of magnitude or a contingency fund, and it covers all funded project work rather than just procurement.