What Is a Project Baseline & Why Does It Matter in Project Management?

Nikoletta Bika
19th December 2022
project planning

Where do all projects start? Well, at the beginning, of course! 😏

That’s the gist of a project baseline: the benchmark project managers set at the project planning phase to effectively monitor project performance over time.

Let’s take a closer look.

What is a project baseline in project management?

Project baselines are "the approved version of a work product used as a basis for comparison to actual results," according to the Project Management Body of Knowledge (PMBOK). Baselines act as reference points you can use to monitor the progress of a project.

There are three types of baseline in project management: schedule, cost, and scope (the three concepts that make up the triple constraint).

Requirement baselines (or scope) are the project’s deliverables and estimated work. They establish what the team needs to achieve and how much work is needed to complete these project goals through a work breakdown structure (WBS).
Schedule baselines are a project’s estimated timeframe. They help project managers track task durations and milestones, which allows project managers to identify any potential delays.
Cost baselines are a project’s estimated budget. They establish an approved budget for the project to help you track actual costs against that budget. This allows project managers to identify potential cost overruns.

Keep in mind that all three baselines affect each other. For example, if you see that the project’s timeline doesn’t follow the schedule baseline, you need to keep an eye on any extra costs because of the delay.

What is a project baseline in agile?

While schedule and cost baselines are generally possible in agile as in traditional project management, the scope varies using an iterative approach.

Agile teams agree on a high-level deliverable (e.g., user stories), but the way to get there is dynamically developed over time. Requirements aren’t meant to be fully fleshed out from the beginning. So, your initial scope baseline is a flexible reference point that captures present requirements. Each release or end of each sprint can be a time to set a scope baseline for the next iteration.

➡️ Learn more about the essentials of agile project management.

Why is a baseline important?

A baseline is important because you want a reference to monitor progress over time. You will only know if the project is going according to plan if you have something to compare it with.

By baselining a project, you can translate your project plan into agreed-upon expectations and then use those to see how well your project team is meeting goals.

This process aims to see where you can make necessary corrections to keep the project on track and on budget. In other words, it's an essential part of change management regarding project work.

Here’s a summary of the benefits of a project baseline:

Better alignment with stakeholders. When you have baselines, it’s easier to communicate plans and get buy-in from everyone involved. This also helps improve accountability and communication.
Catching issues before the project starts. If, for instance, the project’s scope results in longer timelines and higher costs than expected, you may need to adjust the project itself.
Historical estimates and documentation. Baselines give you a trail of data on the details of each project and how much time and resources are needed. The documentation resulting from this process helps you in future projects and in presenting to stakeholders.

How do you create a project baseline?

Developing a complete baseline project plan usually starts with the scope, and moves on to schedule and costs.

When they’re all created, you can integrate them into a performance measurement baseline (PMB) to track progress.

Here’s the process of baselining a project:

1. Scope baseline: Determine purpose and goals

Scope begins by understanding deliverables and overall goals. You’ll already know what these are if you’ve gone through the process of prioritizing ongoing projects or creating and reviewing the project's proposal.

After you understand what needs to be done, you can complete your scope baseline with a WBS—which is often accompanied by a resource breakdown structure or RBS. These structures are hierarchical representations of what activities the project team needs to complete and what resources are necessary for each work package.

Once you have these, you’ll have your initial scope baseline. This is what you’ll measure progress against to identify issues like the all-too-common scope creep.

2. Schedule baseline: Settle on realistic timelines

For this step, you need to estimate the project's start and end dates, phases, and activities (e.g., tasks). This will result in a complete projection of the project's timeline (often shown as a Gantt chart), including:

Activity durations
Start and end date for the entire project
Task dependencies
Lead time and overlap between activities

To determine project timelines, you can utilize similar past projects. For example, it helps to look at historical data (previous baselines will come in handy) and ask stakeholders.

If you’re using project planning software, you’ll already have access to reports that tell you how much time tasks and projects take. You can also easily keep an eye on timelines throughout the project.

For example, here’s what a basic schedule baseline for a short 35-day project looks like in Float.

sample project baseline for schedule in Float

See that little orange dot on January 18? That’s a milestone, and it’s an important point for assessing (and celebrating) progress. You can add as many as you need!

To create better schedules, you need to know how much time each task should take and how much capacity your team has to work on it. With Float, you can see a bird’s eye view of live availability at any point along a project to help you plan better.

3. Cost baseline: Estimate project costs

The previous steps have provided two critical pieces of information to determine costs: what resources you need to pay for and for how long. For example, your RBS tells you that you need to hire three designer contractors and your timeline for design work is a month. This means you’ll have to pay hourly rates for X hours per week for one month.

You can estimate costs by adding them all up, which will produce the full project budget and serve as your cost baseline. Cost baselines usually include contingency reserves, too.

➡️ Take a look at our guide on project cost estimating for more details.

Here is an example of a cost baseline for a construction project:

Project: Renovation of XYZ Building

Project budget: $500,000

Start date: January 1, 2023

End date: December 31, 2023

Task 1: Demolition - $50,000
Task 2: Structural work - $150,000
Task 3: Electrical and plumbing - $100,000
Task 4: Finishing and decorating - $200,000

Set a budget for each project in Float and track it over time

You can add a total budget for the project and then account for each person’s separate hourly rates or set the same hourly rate for everyone. Then track the budget against progress in the reports.

Analyze and control

After you have the PMB, you can use it over time to monitor your project progress. Throughout the project, you’ll use the baselines to gain an understanding of how the project is performing relative to the original plan.

The three baselines factor in your variance analysis, flagging when the team faces lags, budget overruns, or other issues.

For example, expert PM trainer Mike Clayton says:

“If the level of costs rises too far above the baseline and starts to exceed the contingency budget, the project team needs to reconsider the project business case and investment appraisal.”

Does the baseline itself change?

In short, yes. But not haphazardly. You don’t change baselines just because the project is off track or because there are issues and bottlenecks. But you could change the baseline if an unforeseen event makes the current version obsolete or when there are reasonable change requests.

Whatever happens during the project, a baseline arms you with an essential point of reference and documentation. It's a great way to ensure you track progress and deviations correctly and apply the proper controls to bring the project back on track!