Difference between cost plan and budget

It is important not to confuse cost plans and budgets.

A budget is a statement of the amount of money available to spend over a period of time, or on a specific thing, such as a building. The budget is set by the client (although they make seek help to do this). It may include an outline plan for how that money will be spent, and a breakdown of the items it will be spent on. Budgets set a limit for expenditure and this can help determine what is affordable. They should be set as early as possible so that expectations can be managed. It is important that they are based on evidence and that they are realistic, rather than simply stating the amount of money available, or being a wild guess, because, once the budget is set in people's minds, it can be very difficult to change.

For more information see: Budget.

Cost plans are typically prepared by a cost consultant and provide an estimate of what the actual costs are likely to be. Cost plans evolve through the life of the project, developing in detail and accuracy as more information becomes available about the nature of the project. They can range from very early initial cost appraisals through to tender pricing documents and the final account. If the cost plan exceeds the budget, it may be necessary to reduce the cost or scope of the project.

For more information see: Cost plan.

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