Published here January, 2006.

Introduction | The Business Case and Application for (Execution) Funding
Work Packages and the WBS | Request for Capital | The Project's Execution Phase
Use of the Earned Value Technique | The Cost Baseline

The Cost Baseline

  • This planned reference S-curve is sometimes referred to as the "Cost Baseline", typically in EV parlance. That is, it is the "Budgeted Cost of Work Scheduled" (BCWS), or more simply the "Planned Value" (PV).
  • Observe that you need to modify this Cost Baseline every time there is an approved scope change that has cost and/or schedule implications and consequently changes the project's Approved Project Budget.
  • Now, as the work progresses, you can plot the "Actual Cost of Work Performed" (ACWP or simply "Actual Cost" - AC).
  • You can plot other things as well, see diagram referred to above, and if you don't like what you see then you need to take "Corrective Action".


This whole process is a cyclic, situational operation and is probably the source of the term "cycle" in the popularly misnamed "project life cycle".

As an aside, the Earned Value pundits offer various other techniques within the EV process designed to aid in forecasting the final result, that is, the "Estimate At Completion" (EAC). EAC is what you should really be interested in because it is the only constant in a moving project. However, these mathematical wizardries of the EV technique are generally poor predictors of EAC simply because without knowing the shape of the tail end of our S-curve, which we invariably do not, the natural unfolding of project events are not taken into account. Therefore, these extended EV techniques must be considered in the same realm of accuracy as top-down estimating. They are useful, but only if you recognize the limitations and know what you are doing!

But, as we said at the beginning, it is a lot more difficult to do in practice - and involves a significant amount of work. But, let's face it, that's what project managers are hired for, right?

Use of the Earned Value Technique  Use of the Earned Value Technique

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