Budgeting and earned value

The concept of earned value is an important tool of quality if it is planned into the project correctly from the beginning. Earned value is an indicator of how much work that has been accomplished at any given time in the project has earned its value, that is, meets the dual test of quality, customer satisfaction, and conformance to specification. When a percent complete for a task is estimated by a task leader, the percent complete represents an assessment not of all the work accomplished but all the work accomplished that will be acceptable to the customer, e.g., quality work. The earned value is the dollar amount from the original budget that should have been spent for the work, which earned its value.

It is important that the project plan, scope of work, and schedule all reflect the earned value concept because if the project is not set up to relate percent complete to the original budget, then the dollar indicator of earned value will be difficult to estimate.

Earned value is a monitoring tool calculated automatically by any professional project management software if budget costs have been entered into the baseline schedule. If budget has not been entered into the schedule, earned value cannot be calculated. Earned value analysis is scheduled into the project review and monitoring process at key points in the project.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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