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
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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