53
3.4 SETTING THE PERFORMANCE MEASUREMENT BASELINE (PMB)
The project team analyzes, consolidates, and integrates the information from the scope, schedule, and cost
baselines. The baseline information incorporates the information from the risk registers and risk response plans.
The granularity of the PMB can be progressively elaborated throughout project planning and execution in an
iterative process as the project scope, schedule, and cost estimates are refined into greater detail. Either tabular or
graphical means can be used to display the information, but good practice suggests that both forms be developed.
Although the PMB could be set manually, it is good practice to use software applications such as spreadsheets,
scheduling software, or applications tailored for the implementation of EVM. At this point in the planning, for each
baseline planned, the PMB can be set. The following have been accomplished and should now be recorded, reviewed,
and validated into the PMB:
Each work and planning package was estimated; therefore, each control account has a budget. The budget
and the associated resources the budget represents is the total PV (i.e., the budget at completion [BAC]) for
these scope components.
Risk responses were developed, and each risk response cost was incorporated into work or planning package
budgets or as contingency reserve, as appropriate.
Undistributed budget was recorded for work authorized by the project charter and scope documentation, but
has not yet been assigned to the control account level of the WBS.
Each work and planning package was scheduled. They have planned dates when they should occur.
Each CA was assigned to a responsible person or team.
Methods of measurement were established to enable the reporting of the amount of scope or work
accomplished once work enters a phase of execution.
Methods were established to gather actual cost information associated with each CA at regular intervals, for
example, every week or month.
At this point, the project has a combined scope, schedule, and cost into a time-phased, integrated baseline that
represents costs over time (see Figure 3-8 and the example in Appendix X4). The PMB captures the scope’s PV, which
is time phased and establishes how actual work progress will be measured. Progress data and actual costs at the
CA level are recorded into the PMB once the work begins. Using the PMB, EVM analyzes the actual performance in
contrast to the baseline. Additionally, EVM uses the actual performance as a predictor for future performance.
54 Section 3
Figure 3-8. Performance Measurement Baseline (PMB)—The Planned Value (PV)
Time (Weeks)
$1,500,000.00
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$-
0 10 20 30 40 50 60 70
Project Budget
PRJ – Whole Project
Planned Value (PV)
Management Reserve
3.4.1 PROJECT BUDGET
The project budget is the sum of work and planning package cost estimates, the contingency reserve(s), and
the management reserve. For EVM, the PMB part of the project budget includes the sum of the work and planning
packages and contingency reserves within all of the CAs for which EVM will be performed. The project budget and
PMB can be set in various ways, which depend on the OPAs and EEFs for the particular project or organization.
55
3.4.1.1 MANAGEMENT RESERVE (MR)
Management reserve is the time or budget that management sets aside in addition to the schedule or cost baseline.
Management releases the management reserve for unforeseen work that is within the scope of the project. In most
projects, and certainly in major projects, there is considerable uncertainty regarding the magnitude of future events or
difficulties. To accommodate this uncertainty, a certain amount of the project budget can be identified as management
reserve. The control of the management reserve depends on the OPAs and EEFs that the project team is working with.
The management reserve and the budget for the PMB are components of the project budget. The management
reserve is typically not time phased and is not part of the PMB. As with contingency reserve, management reserve
should not be used to mask performance-related overrun conditions. Rather, the contingency reserve is intended to be
a budget for risk responses within the project charter’s statement of work. The management reserve is for unforeseen
risks that have had no anticipated risk responses established in the project management plan.
3.4.1.2 UNDISTRIBUTED BUDGET (UB)
Undistributed budget refers to project work within the PMB that has not yet been incorporated into a planned CA
and, therefore, is typically not yet time phased. It is a temporary holding account for work and budget. OPAs should
stipulate how UB is handled within the PMB, such as time phases at the end of the project.
3.4.1.3 CONTROL ACCOUNT (CA) BUDGETS
The next level below the project that provides a management control point is a CA. All work to be accomplished
using EVM needs to be in a CA and further broken down into WPs. The accumulation of CA budgets should add up
to the PMB with the addition of an undistributed budget. CA managers identify risks at their level. This may create
some additional or alternative activities within certain WPs that may have uncertainties related to duration and/or
cost. CA managers assign and time phase budgets for CAs and their corresponding work in accordance with an
approved schedule, which may include both direct and indirect costs. CAs are time phased according to the rolling
wave concept, which requires detailed planning of work packages for a specified number of EV reporting time periods
before the scheduled start of the work. The budget at completion (BAC) for each CA is the sum of the work packages,
planning packages, and contingency reserve budgets.
56 Section 3
3.4.2 ESTABLISHING THE PMB
The PMB consists of three baselines integrated into one. Typically, as part of setting the baseline, there is a process
(either documented in an OPA or called for in an EEF) where the work described under the baseline is authorized,
tracked, and funded. Additionally, as each CA is a segregated part of the project that is managed, the project team
frequently develops and maintains a CA plan that captures the specifics of the CA.
3.4.2.1 AUTHORIZE THE WORK
Authorization is the formal permission and direction to begin a specific project effort, which, typically, is a CA. It is a
method for sanctioning project work to ensure that the work is done by the identified organization, at the right time, in the
proper sequence, and within the approved baseline. In its simplest form, the work authorization process follows these steps:
Step 1. The project manager receives authorization to proceed with the project by means of a project charter
or customer contract/authorization. This authorization may include limits on the funds available to the project
manager, which is the amount of budget that is authorized.
Step 2. The project manager authorizes the next tier of management to proceed with the assigned work,
usually by issuing a work authorization document. Typically, this next level is the CA level, but there could
be one or more additional levels between the total project and the CAs. If so, each level receives its own
authorization and then continues the authorization within its prescribed, unbroken chain of authorization.
Step 3. In some organizations, functional manager concurrence or authorization may be required.
Step 4. The CA manager may authorize specific individuals to begin work and provide the scope, planned
budget (often in hours), and charge numbers required to be used.
3.4.2.2 PROJECT BUDGET LOG
The project budget log is the central repository for all project budgets. At any time, the project manager should
be able to review the project budget log and obtain a complete accounting of the value and classification for every
element of the project budget in addition to changes to the budget throughout the life of the project. As work is
authorized for control accounts, entries are made in the project budget log to show the movement of budget from the
undistributed budget to the distributed budget. When the entire project is authorized into control accounts (or control
accounts and summary-level budgets), the value of the undistributed budget will be zero. Within CAs, the budget is
authorized to work or planning packages. An example of the initial project budget log is shown in Figure 3-9. A broader
example is shown in Appendix X4.
57
Budget Log
AmountTo AccountFrom AccountDate Description
Program budget
Initial fund CA
Initial fund CA
Initial fund CA
Initial fund CA
Initial fund CA
Create MR account
Authorize WP-01
Authorize WP-02
$1,500,000
$336,000
$67,700
$928,080
$61,280
$13,700
$93,240
$19,840
$297,600
Project
CA-001
CA-002
CA-003
CA-004
CA-005
MR
WP-01
WP-02
Corporate
Project
Project
Project
Project
Project
Project
CA-01
CA-01
6-January
6-January
6-January
6-January
6-January
6-January
7-January
8-January
8-January
Figure 3-9. Project Budget Log Example
3.4.2.3 PROJECT FUNDING REQUIREMENTS
Total funding requirements and periodic funding requirements are determined based on the project cost estimates
and time-phased budget. When available funding is not consistent with the required funding, the project may need
to be replanned to meet funding constraints. The project funding requirements are then updated to agree with the
budgetary decisions made to establish the PMB.
3.4.2.4 CONTROL ACCOUNT PLAN
The detailed plan for a CA is called a CA plan. The CA plan contains all elements and aspects of the control account,
some of which include:
Name of the responsible CA manager;
Description of the work scope to be done;
Specific milestones to be accomplished;
WPs that delineate the scope, schedule, and budget (incrementally, cumulative to date, and at completion) for
specific, well-defined tasks within the CA;
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