As I continue wrestling with the budget for Love in the Time of Monsters, I keep running into the same dilemma. How much money do I put into each section? How much is too much or too little? How do you know if you've gotten it right, or you are setting yourself up (and the project) for failure?
Obviously we don't have unlimited funds for LiToM, but unless you are a major studio project given a blank check, you are going to have to make some hard choices with the budget. Even the Lord of the Rings trilogy had budget constraints, for gosh sakes. The first hard choice a producer has to make deals with people. As Matt likes to point out, all department heads (camera, costumes, post-production, etc) fight for their departments, and they should! It's their job to make sure enough money flows in, otherwise they can't do great work. Think about it this way: if I short change the costume department in LiToM, the chance the bigfoot costumes come out well goes down. But I have to make sure the makeup department gets its fair share as well, or those same bigfoots look bad in a whole different way.
The other problem lies in the unknown. It's one thing to negotiate a rate for a particular crew or cast member, but what do you do when it's really hard to get a solid number? Take Special EFX: You can get a general number about how much to spend, but as things progress during shooting, things might change. And when things change, they don't usually get cheaper, if you catch my drift. And the contigency plan you built into the budget can only cover so much "oops" factor; you need to get as close as you can to a real number.
So what's a poor producer to do? The first thing I do is admit that I don't know everything (yes, producers can do that) and communicate with my department heads. If you are honest about the funds you have, and although they will still defend their turf, you can get honest numbers. At the end of the day, everybody wants to make the best movie possible (which is why you hire good people) and when they realize you aren't just being a cheap bastard they will understand your budget limitations. The same thing goes for "unknown" numbers, seek out experts in the field and be upfront about what you can and can't do. People in this town appreciate someone who isn't blowing smoke all the time.
At the end of the day, making your budget is like making your movie. Honesty and integrity will get you far, and the relationships you build during this step will benefit you long term.