How do you build and control a project budget?

What the interviewer wants to hear

• Estimate costs bottom-up from the WBS
• Add contingency for known risks and management reserve for unknowns
• Create a time-phased cost baseline
• Track actuals and commitments regularly
• Use earned value or forecasts to spot overruns early
• Changes to the budget go through change control

Model answer

I build the budget bottom-up from the WBS, estimating labour, vendors, licences, hardware and other costs for each work package with the people who know the work. I add contingency reserve based on the risk register and keep management reserve for unknowns, agreed with the sponsor. I then spread the costs over time to create a cost baseline, which also helps finance plan cash flow. During the project I track actual costs and committed spend, such as signed purchase orders, every month or more often. I compare them with earned value and update the forecast, because the forecast matters more than the spend to date. If I see an overrun coming, I raise it early with options like scope trade-offs or using contingency. Any change to the baseline goes through change control, so the budget stays honest and auditable.

More medium Project Manager questions

• How do you prevent and handle scope creep?
• How would you handle a team member who is underperforming?
• How do you estimate effort and timelines for a project?
• How do you deliver bad news, like a delay, to your sponsor?
• How do you manage dependencies on other teams that you do not control?
• Explain earned value management and how you use it on a project.
• Walk me through how you run change control on a project.
• How do you decide which contract type to use with a vendor?
• How do you plan and run a project kickoff meeting?