The planning phase is when the bulk of the planning for the project is completed.
During this phase the project team gather requirements, prepares the functional specification, work through the design process.
After these, the team prepares or refines from the statement of work, work plans, cost estimates, and schedules for the various deliverables.
The results of the design process are documented in the functional specifications.
The functional specification describes in detail how each feature is to look and behave. It also describes the architecture and the design for all the features.
The functional specification serves multiple purposes, such as instructions to developers on what to build, basis for estimating work, agreement with customer on exactly what will be built, and point of synchronization for the whole team.