How To Set The Right Project Baseline And Stay On Target

Posted by Deltek on October 10, 2019

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For project-based firms, there are three key building blocks to delivering successful outcomes. These are:

  • Setting the right baseline; 
  • Executing the project and controlling progress; and 
  • Managing the financials.

What Is A Project Baseline?

As the first item building block, the project baseline plays a fundamental role – it’s the strong foundations on which great projects are built – because it provides a central reference point for all of a project’s moving parts.

In essence, the project baseline is a combination of the data related to project scope, cost and schedule, and helps to establish the benchmark for the measurement of project deliverables over time.

The most effective project baselines are defined and agreed upon ahead of project commencement, and combine data specific to the project at hand, and historical knowledge from established benchmarks, to provide a clear pathway for project delivery.


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Why Is It Important To Establish A Project Baseline In Project Management?

Working from a project baseline makes it easier for project managers to determine and measure how the project’s actual delivery differs from the agreed plan, by making it easier to spot variations or deviations from the agreed plan, and to pinpoint the nature of these – whether they relate to scope creep; or escalating costs; or unmet deadlines, or any combination of them – and to address them at the source.

Perhaps one of the biggest risks of not having a project baseline is scope creep, which has several negative ramifications, including opening up grey areas between tasks the team should be executing and the client’s expectations.

If a project’s scope is not clearly defined, documented and communicated at the outset – ideally in a project scope statement – it can be difficult to rein in scope creep over time.But it’s not enough just to have concise documentation if it’s not properly supported; a strong project progress management team is required to keep teams on course.

Working to the agreed project scope statement can help prevent your firm from incurring unwelcome costs, because scope creep can quickly erode your company’s bottom line and - left undetected – eat away at profit margins. Working beyond your company’s financial means can also adversely stunt your firm’s capacity to add new projects to the forward pipeline, thereby negatively impacting on future growth.

Remember, communication is key. If scope creep does occur (as it invariably does) it’s vital to talk to your clients and come up with new parameters within the project baseline, including how any new changes will be integrated and costed, to avoid discrepancies when it comes to invoicing and payment.


"If a project’s scope is not clearly defined, documented and communicated at the outset – it can be difficult to rein in scope creep over time."


How To Set The Right Project Baseline And Stay On Target

There are four key steps to the project planning process, and these are:

1. Estimate the project and establish cost control data: Ensure that any cost projections provided to the client by your estimating or business development teams align with the project manager’s own cost estimates for the project, because these figures will form the basis of the project’s deliverables. Establishing the correct pricing figures upfront provides an accurate reference point for cost control throughout the life of the project.

2. Establish the right project team before you start: Often projects are staffed with people who are available, rather than employees best suited to the project. Before any new project kicks off, it pays to take time to assemble key decision-makers and team leaders to establish the best team for the project. Doing so at the outset will likely save time, money and stress down the line.

3. Agree on a precise scope and get the client to sign off: Many projects commence without adequately defining project scope. Ideally, your client should agree upon and sign a project Statement of Work (SOW) to mitigate against disparities later on. Alternatively, if you opt to commence a new project before obtaining client sign-off, ensure you have adequate project forecasting in place to mitigate over-servicing.

4. Kick off the project and get everybody aligned: Once the budget has been agreed, and you have the right team in place, and the client has signed the Statement of Work, it’s time to kick off the project. Invite the core team – and eventually the client team – to establish deliverables, governance and the project time line. 

If you’ve noticed that individual project targets seem to continually shift beyond your agreed parameters, you’ve possibly also noticed that your firm’s overarching business objectives tend to shift with them. Conversely, when a project is adequately scoped, effectively staffed and efficiently funded, your project targets and firm’s targets appear realistic, and your firm can grow and thrive. So, it’s essential to spend the time you need upfront to establish a realist project baseline.

project reporting

What Are The Best Key Performance Indicators For Measuring Project Progress?

The second of the three building blocks is to execute the project and control progress, and that’s where choosing the right Key Performance Indicators (KPIs) is essential.

When evaluating your project baseline there are three key measures to bear in mind: 

• Firstly, Over-Servicing: determine whether you are devoting too much time to a particular task or milestone, by comparing budgeted figures to actual costs. Maintaining a clearsighted view of this indicator will enable you to distribute financial resources more efficiently. 

• Secondly, Project Margins: calculate your profit by deducting the cost of internal and external costs from actual revenue, to arrive at the project margin. Compare this figure with results from previous projects to get a snapshot of the firm’s performance over time; 

• And thirdly, Percentage Complete: keep a close watch on project progress reports in comparison with the baseline, to guard against scope creep, and cost and schedule overruns.

Remember you want to exceed your client’s expectations without exceeding your firm’s cost, time and resource budgets, so it pays to constantly keep abreast of these KPIs to stay on target.


"Remember you want to exceed your client’s expectations without exceeding your firm’s cost, time and resource budgets."


What Is The Key To Managing Project Finances?

The third key building block of successful projects is managing your financials, and these rely on tasks and reports from the project team, and other departments across the firm, to run smoothly. We recommend focusing on four core areas to ensure successful delivery of projects, and to position your firm to scale up to future growth if desired. Start with:

1. Weekly time and progress management: Keeping abreast of accurate and prompt time inputs in the form of timesheets – for both internal and external team members – is critical to the success of projects and firms. Ideally, timesheets for the previous week should be completed and lodged no later than the following Monday morning. And, if variations are needed against the agreed baseline, these should be lodged and approved in a timely manner. Careful monitoring of timesheets helps to provide project managers with accurate data to track progress against the baseline, and to make any necessary adjustments.

2. Weekly project staffing processes: In an ideal world, project staffing would be updated and managed as and when required, but ideal worlds don’t always exist. So, it pays to update project staffing records by an agreed day each week, typically a Thursday. This leaves Fridays to clarify any booking conflicts for the following week. 

3. Monthly control: As part of the finance team’s month-end process, project managers should provide detailed project progress reports for each project. Actual figures can then be evaluated against the baseline, in terms of the value of Work in Progress (WIP, for Time & Money contracts) or percentage completed (for Fixed Price contracts). 

4. Monthly invoicing: Maintaining tight reins over project cash flow is essential to project and business success, so invoicing should take place regularly in accordance with agreed tasks or milestones, or as payment plan dates fall due. Whether the invoicing process is the responsibility of project managers or finance managers will vary in each firm, but we recommend that project managers are best placed to execute invoicing, as they are in closer proximity to project progress and the client.

project baseline in project management

How To Calculate Project Progress Against The Baseline?

Once the project has kicked off, it’s common for variations and deviations to crop up, and these place pressure on any or all three of the baseline’s moving parts: cost, scope and schedule.

The project manager is responsible for making adjustments to the project baseline – and implementing realistic solutions to keep the project on track – and maintaining smooth communications among the project team and the client.

Deviation from the initial project baseline is virtually inevitable, so we recommend you employ the “core model of progress management” to measure and adjust your progress over time. It can be calculated as follows:

Baseline (contractual budget) + Actual (spend so far) + Estimated Time to Complete = Estimate At Completion (EAC)

Once you have calculated this adjusted EAC figure, it provides an accurate indication of the project status as a percentage of the total time allocated. For example:

project status

How To Maintain Control Of Your Project: A Final Note On Financial Management

Project managers are the main interface between project teams and clients, and, as such, play a critical role in maintaining accurate and timely communication among the various parties regarding project deliverables and financial management. 

The easiest way to streamline the entire process is to set realistic financial terms, and to monitor your resource distribution regularly.

To ensure your project baseline is completely supported, we mentioned earlier the need for a water-tight Statement of Work, which outlines each party’s relevant financial stipulations. Often these contractual obligations are embedded in a Master of Service Agreements (MSA), so referencing that document in your SOW may be sufficient. 

In addition, there are four other financial variables that will impact on the success of both individual projects, and the firm more broadly, as follows: 

  • Payment terms: Ensure that your contract (MSA and/or SOW) has a clear definition of agreed payment terms; 
  • Delivery dependent payments: When you enter fixed price contracts, define the events that will trigger invoice requests in the SOW. Alternatively, you can prepare a date dependent payment plan, which may include partial payment up front. 
  • Type of contract: The project contract should stipulate whether the project is being delivered under a fixed price or Time and Money (T&M) arrangement. 
  • Expense handling: The SOW should also stipulate how project expenses will be treated, for example, should they be invoiced on a cost-spend basis? 
  • Assumptions: The SOW should outline a clear set of assumptions in relation to your firm’s expectations around dependencies, and how these might impact upon your deliverables.

It’s safe to say that no-one involved in project delivery – from project teams to project managers, and business leaders to clients – appreciates major deviations from the agreed project terms. That’s why it’s imperative to establish an effective project baseline, and then use it to steer projects towards successful completion.


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