Last updated on Aug 22, 2024
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Define the program objectives and scope
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Estimate the program costs
3
Identify the program funding sources
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4
Allocate the program budget
5
Monitor and control the program budget
6
Review and evaluate the program budget
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Here’s what else to consider
A program budget is a detailed plan of how you will allocate and manage the resources for a program, which is a collection of related projects that share a common goal and vision. Creating a program budget is a key skill for program managers, as it helps them align the program scope, schedule, quality, and risks with the available funds and resources. In this article, you will learn how to create a program budget in six steps.
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- Dasia Johnson APEX Accelerator Program Specialist
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- Gaurav Goel, PMP®, CSM, SAFe 6 Agilist, SAFe POPM Ex- BNY Mellon, Ex- Vodafone
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- Adeyinka Akinade Osunbade CEO | Driving Energy Efficiency and Management in Africa | Thermography and Tools
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1 Define the program objectives and scope
The first step is to define the program objectives and scope, which are the expected outcomes and deliverables of the program. You need to have a clear and realistic vision of what the program aims to achieve, how it will benefit the stakeholders, and what are the boundaries and assumptions of the program. This will help you identify the high-level requirements and constraints of the program, such as the scope baseline, the key performance indicators, the governance structure, and the change management process.
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- Gaurav Goel, PMP®, CSM, SAFe 6 Agilist, SAFe POPM Ex- BNY Mellon, Ex- Vodafone
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clearly outline the program’s goals, deliverables, and scope. Understanding what the program entails helps in estimating the resources required.
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- Dasia Johnson APEX Accelerator Program Specialist
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I have presented my RFPs to a peer/colleague who is not invested in this particular program, but knowledgeable in foundational elements of the program. Use this person as a baseline to assess the clarity and readability of the RFP.
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Create a detailed program scope, identify all costs (personnel, materials, overhead), and estimate resource requirements. Categorize expenses, allocate funds, and build a realistic budget. Consider contingencies and potential revenue streams. Involve stakeholders for input and approval. Regularly monitor and adjust as needed.
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To create a program budget, I would start by defining the program’s goals and scope and developing a Work Breakdown Structure (WBS) to divide the program into detailed tasks and deliverables. Using project management estimation techniques such as analogous estimating, parametric estimating, and bottom-up estimating, I would determine the costs associated with each task. I’d allocate budgets accordingly, include contingency funds for unforeseen expenses, and collaborate with stakeholders to refine estimates. Regular monitoring and adjustments would ensure the budget remains accurate and supports the program’s success.
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2 Estimate the program costs
The next step is to estimate the program costs, which are the expenses that you will incur to execute the program. You need to consider the direct and indirect costs of the program, such as the labor, materials, equipment, travel, subcontractors, overheads, and contingencies. You can use various techniques to estimate the program costs, such as analogous, parametric, bottom-up, or three-point estimation. You also need to account for the cost uncertainty and variability, such as inflation, exchange rates, market fluctuations, and risks.
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- Priscila M. Versatile Program and Product Manager; skilled in leading high-impact projects and managing cross-functionally to boost efficiency | PMP-certified | Let's Get It Done!
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Estimate the costs of the program. They are typically divided into: - Personnel - Technology - Enablement- Travel and EventsDon't forget to include a buffer in the total amount or the level of each category above.
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- Dasia Johnson APEX Accelerator Program Specialist
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This portion of the RFP typically requires some research into the commercial market of potential contractors. Compare the average costs to the available funds. Alternatively, consider the costs and the amount of potential end users. Use those metrics to determine the most cost-effective program budget.
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- Gaurav Goel, PMP®, CSM, SAFe 6 Agilist, SAFe POPM Ex- BNY Mellon, Ex- Vodafone
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Break down the program into cost categories such as personnel, materials, equipment, travel, and overhead. Each category should encompass all relevant expenses. Gather cost estimates for each category. This may involve obtaining quotes, researching market rates, and calculating labor costs based on project timelines and team roles.
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3 Identify the program funding sources
The third step is to identify the program funding sources, which are the sources of income that you will use to finance the program. You need to determine how much funding you have available, how much funding you need to secure, and how you will obtain and manage the funding. You can use various methods to identify the program funding sources, such as grants, loans, sponsorships, donations, or internal allocations. You also need to understand the terms and conditions of the funding sources, such as the eligibility criteria, the reporting requirements, the repayment schedule, and the restrictions.
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4 Allocate the program budget
The fourth step is to allocate the program budget, which is the process of distributing the program funds and resources among the program components and activities. You need to align the budget allocation with the program objectives and scope, and ensure that each program component and activity has sufficient and appropriate funds and resources to deliver the expected results. You can use various tools to allocate the program budget, such as the work breakdown structure, the responsibility assignment matrix, the resource breakdown structure, or the cost baseline.
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- Aaron Ong Program Manager @ PMO | Project Management
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It is very important to allocate the right amount of money for the program's budget before any project has started. This helps to steer the project's objectives easily while keeping scope creeping at bay. To be able to do this, there must be a clear understanding of the objectives of the program, and the steps or milestones that need to happen along the way. Think of each milestone as a stepping stone towards the end goal which is the actual objective that the program is trying to realize.
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5 Monitor and control the program budget
The fifth step is to monitor and control the program budget, which is the process of measuring and managing the actual performance of the program against the planned budget. You need to track and report the actual costs and revenues of the program, compare them with the budgeted costs and revenues, and identify and analyze any variances and deviations. You also need to implement corrective and preventive actions to address any issues or changes that affect the program budget, such as scope changes, schedule delays, quality problems, or risk events.
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- Dasia Johnson APEX Accelerator Program Specialist
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Whatever platform is used, there should be a limit to amount of owners of this data. The information should be housed on one platform.
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- Gaurav Goel, PMP®, CSM, SAFe 6 Agilist, SAFe POPM Ex- BNY Mellon, Ex- Vodafone
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Once the program is underway, track actual expenditures against the budget. Regularly update the budget as needed to reflect any changes in scope or unforeseen costs.
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6 Review and evaluate the program budget
The final step is to review and evaluate the program budget, which is the process of assessing and improving the effectiveness and efficiency of the program budget. You need to collect and analyze the feedback and lessons learned from the program stakeholders, such as the sponsors, the customers, the team members, and the suppliers. You also need to evaluate the achievements and challenges of the program budget, such as the cost performance, the return on investment, the benefits realization, and the stakeholder satisfaction.
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7 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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- Adeyinka Akinade Osunbade CEO | Driving Energy Efficiency and Management in Africa | Thermography and Tools
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In a previous program, we faced challenges with cost overruns. By reviewing the budget, we generated new KPIs based on experiential knowledge, such as real-time cost tracking and supplier performance metrics. This allowed us to identify inefficiencies early and adjust resource allocation accordingly. The updated KPIs improved cost performance by enhancing accountability and enabling quicker corrective actions. Stakeholder feedback was instrumental in refining these metrics, ultimately boosting ROI and satisfaction.
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