Projects, especially larger ones, are never executed exactly as they are planned. Some activities finish early. Some finish late. Sometimes it is not easy to know if you are ahead of schedule or behind. Likewise, sometimes it is hard to know whether you are under budget or not.

Let’s look at a simple example. Let’s say you have a six-month project and you have completed three months. Your schedule says that you should have spent 50% of your budget, but you realize you have already spent 65% of the budget. Are you in trouble?

You could be, but not necessarily. If you only have half of the work done, you might be in trouble. But what if you are actually ahead of schedule? If you are ahead of schedule, it might make sense that you are over budget at this point in the project. If you were 90% done with the work, and your budget was at 65% of total, you actually are in pretty good shape.

This is the purpose of earned value calculations. Earned value is a method for determining the progress of a project, given where you are versus where you expected to be.

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