I'm drafting a charter for an infrastructure upgrade. The stakeholders are asking for a line-item budget before they sign off. I feel like it's too early for that since we haven't done the full work breakdown structure (WBS). Is it standard to put a specific dollar amount in the charter, or should I use a Rough Order of Magnitude (ROM) estimate like -25% to +75%?
3 answers
In the chartering phase, you simply don't have enough information for a line-item budget. You should use a Rough Order of Magnitude (ROM) estimate. Providing a specific number now is dangerous because stakeholders will hold you to it later, even after you discover new complexities during the planning phase. Most PMs include a "Budget Ceiling" or a "Not to Exceed" amount based on the business case. Explain to your stakeholders that the detailed budget will be a primary output of the planning phase after the WBS and resource leveling are completed. This manages expectations and protects your project's success metrics.
Have you tried showing them a range instead of a single number? Sometimes providing a "Best Case" and "Worst Case" scenario in the charter can satisfy their need for financial data.
The charter should only reflect the "Authorized Budget." If the company has only allocated $500k, that’s the number that goes in, regardless of what the final cost might be.
True, Margaret. It’s about authorization. If the charter says $500k, that is your limit until a formal change request is approved later in the project lifecycle.
Paul, I tried the range approach, and it actually helped! I used a -20%/+50% range and explained it as a "Preliminary Estimate." It shifted the conversation from "why is this so expensive" to "what can we do to stay on the lower end of that range." Sandra, your point about the WBS was the clincher—once I explained that the budget is a reflection of the tasks, and the tasks aren't defined yet, they backed off on the line-item requirement.