A cost baseline is an approved time phased plan. Once a detailed budget is developed and approved, the project manager should publish this baseline and set it as a point of comparison for actual performance progress.
One of the biggest challenges a project manager faces is determining when to set the baseline for the budget. A baseline is an approved time phased plan. Creating a baseline should not be a ‘scary' thing. It is just a starting point from what to measure performance against.
There will always be unknowns in the project, especially early on. Accept that projects will always experience changes and evolve in order to ensure delivery of the scope defined. The baseline budget is the tool for measuring how project changes affect our schedule and budget.
Ideally, new baselines should only be added when there is a change in scope. If the scope stays the same, then there is not a need to add a new baseline. Again, the baseline is a benchmark to measure performance against. It represents an understanding of the costs of the project based on the scope of the project. The initial baseline is usually what gets budgeted in a company's financials.
With that being said, there could be two other reasons why a baseline may be changed.
When baselines do change, it is important to document and understand the reasons for the change. It is a best practice to post any baseline changes in the project status comments. The change itself should have been reviewed and approved by a Change Control Board before modifying the baseline.