WHAT IS EARNED VALUE

Earned Value is an objective measurement of how much work has been accomplished on a project.

Earned Value, Performance Measurement, Management by Objectives, and Cost Schedule Control Systems are synonymous terms. The use of either manufacturing standards or a Line-of-Balance methodology for measuring accomplishment on the factory floor is an earned value process.

Earned Value improves on the "normally used" spend plan concept (budget versus actual incurred cost) by requiring the work in process to be quantified.

Using the earned value process, members of management can readily compare how much work has actually been completed against the amount of work planned to be accomplished. Earned Value requires the project manager to plan, budget and schedule the authorized work scope in a time-phased plan. The time phased plan is the incremental "planned value" culminating into a performance measurement baseline. As work is accomplished, it is "earned" using the same selected budget term. Earned Value compared with planned value provides a work accomplished against plan. A variance to the plan is noted as a schedule or cost deviation.

Normally the established accounting system provides accumulation of actual cost for the project. The actual cost is compared with the earned value to indicated a over or under run condition.

Planned Value, Earned Value, and Actual Cost data provides an objective measurement of performance, enabling trend analysis and evaluation of cost estimate at completion within multiple levels of the project.

Project management should be applied to every project where the owners of the final product wish to ensure that the expended resources were used efficiently. On major projects the application of good project management tools will aid in the selection of the right course when managers need to make financial and time allocation decisions.

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