Once the cost estimates for each activity are available, the cost budgeting process involves aggregating the values to create the cost baseline. This cost baseline is used to measure project performance. The updates to the cost management plan are included in the project management plan.

Reserve Analysis yields contingency reserves on individual activities or groups of related activities. These allowances are in response to uncertainty or potential risk events. Uncertainty can be defined in terms of knowns and unknowns.

• Known items are those things you plan for.

• Known Unknowns are those things you hedge for (contingency).

• Unknown Unknowns are those items that were never part of the scope and should be addressed through a well-defined change control process.

A Management Contingency Reserve may be established for potential required changes to scope at the project level. Sometimes simply called Contingency Reserve, these are the amount of funds, budget or time needed above the estimate to reduce the risk of overruns of project objectives to a level acceptable to the organization. Management contingency reserves are NOT part of the cost baseline, but are in the project budget.