Sat. Jan 21st, 2023

Project Budget

All projects have a budget. Without them, it would be impossible to source and utilise the right level of:

  • people
  • equipment
  • materials

Looking at it from a different perspective, all projects have a set of deliverables – that is what the project should achieve.

When we discuss a budget, it has two meanings.

  • From the client’s perspective, we mean “How much can they afford to pay for this work to be completed?”
  • From the Project Manager’s perspective, we mean “What will it cost for this work to be completed the way we intend to do it, and what will the money be used for?”

Clearly, the first is easy: a client says “We can spend up to £100k on…”. The second is much more difficult, and that is the question that we need to be able to answer.

Could you take on a project knowing the deliverables, but not the budget?

What is a project budget?

A project budget aims to estimate the total cost of implementing a project, over a specified timescale. We look later on in the course at how to implement the budget, but for now, the budget must account for anything that incurs a cost during the project. This includes, but is not limited to:

  • Manpower – the project manager will need to be paid, as will every other member of the development team. Every hour that is worked needs to be billed, whether it is by a software developer, a software tester, a database architect, IT support, the time taken to configure and install servers, meetings and so on
  • Equipment – just because you are planning a software project doesn’t mean all of the required equipment is available. You may need to purchase or hire specialist equipment for the development team to use during the development process – this is obviously a cost. You may also have to purchase and provide hardware as part of the project completion: if your client has asked you to design and implement a backup system, you will have to factor in the cost of the backup equipment.
  • Materials – any other purchases or costs required that do not fall in to the other two categories. For example, if you are required to visit remote sites as part of the project, there will be a transport and potentially accommodation cost to account for

The project budget is the best possible estimate of how the available money will be spent across these categories.


Look at any large, public project – HS2 is a good example. The budget for this is in the range of billions of pounds. Was all of that money required upfront? The answer, unsurprisingly, is no.

Consider a more modest project, where a company has asked for a new till system, along with training. Perhaps the budget for this is in the region of £100k, and it is going to take around six months to complete. Is the £100k required upfront? (This is not the same question as ‘Would the developer like the money up front?’ whatever their reasons).

In reality, the money is required in tranches; different amounts at different times. If you are purchasing equipment, then you will need that part of the budget paid in time to make the purchase.

If you have a software developer working for three months, they will want paying at the end of each month, and so that part of the budget will need paying in monthly instalments.

If you are offering training to the end-users, and this is scheduled to happen at the five-month point, then you will be billing for this after five months.

This allows the client to understand what their money is being used for, and when they are expected to pay.

Coming up with an estimated price

Given a client who approaches you requesting work to be completed, and has a budget of £150k available, how are you going to price the work? Some of the issues arising include:

  • Should you go for £150k, and get as much as possible?
  • Would a client choose a company that didn’t itemise how their money was going to be used?
  • Is the available budget even enough to actually complete the project as requested? If you can’t create a budget that completes the work within the allocated budget, then you need to either:
    • Reject the project offer
    • Renegotiate the deliverables, by altering the scope of the work to allow it to fit with the available funds

Project Viability

The steps involved in creating a budget for a project provide important evidence to be used in the determination of whether a project is viable or not.

Later on in the unit, we will explore how time is allocated to developers – this information is needed in order to determine:

  • Whether the project can be completed on time – perhaps there is plenty of money available, but not enough manpower to deliver it on time. This can be due to there being simply too many hours for the staff available, or the requirements of the hours (specialisms) may not correlate well with the staff available. Part of the job of a project manager is to allocate tasks to staff to make the best use of specialisms where possible. For example, you may have staff who can do one type of work twice as quickly as other staff, but you have to use them elsewhere because no-one else can perform some of their duties. We use project management tools to aid in this sort of planning
  • Whether the project can be completed at a satisfactory cost – see the points raised above

Useful links

You should now read the following two pages, which explain the importance of a good project budget.

7 Steps for a successful project budget

What is a project budget?

Next step

On the Unit 3 overview page, you should now complete the task “Identifying costs on a project”.