Every contract budget term in earned value management is a piece of the one above it. This diagram shows how contract price, cost and budget fit together, from Contract Target Price down to the work package, with the equation at each level. It has been checked against the DoD Earned Value Management System Interpretation Guide (EVMSIG), June 24, 2026.
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How to read the diagram
Each row breaks a total into its parts. The gold piece is set aside at that level; the blue part carries down to the next row. Block sizes are illustrative, not to scale.
Level by level
Contract Target Price (CTP)
CTP = NCC + Fee
The Contract Target Price is the Negotiated Contract Cost plus the target profit or fee. Fee applies only to the negotiated cost. Contract Target Cost (CTC) is the same thing as NCC; the EVMSIG says the two terms are synonymous.
Contract Budget Base (CBB)
CBB = NCC + AUW
The Contract Budget Base is the negotiated cost plus the estimated cost of Authorized Unpriced Work: work the customer has authorized but not yet negotiated. AUW carries no fee until it is negotiated.
Total Allocated Budget (TAB)
TAB = PMB + MR (should equal CBB)
The Total Allocated Budget is everything budgeted on the contract: the Performance Measurement Baseline plus Management Reserve. It should equal the CBB. When TAB exceeds CBB, the program is in an Over Target Baseline (OTB), which the customer’s contracting authority must approve. The amount above the CBB is the Above Target Budget (ATB).
Performance Measurement Baseline (PMB)
PMB = Distributed Budget + UB
The Performance Measurement Baseline is the time-phased budget plan that performance is measured against. It holds the Distributed Budget plus Undistributed Budget: budget for identified scope that hasn’t yet been assigned to a control account or SLPP. Management Reserve sits outside the PMB.
Distributed Budget
Distributed Budget = Control Accounts + SLPPs
Distributed budget goes to Control Accounts, or to Summary Level Planning Packages (SLPPs) for far-term work that isn’t yet practical to plan in control accounts. SLPPs sit above the control account level and should be broken into control accounts as soon as practical.
Control Account (CA) and SLPP
CA = Work Packages + Planning Packages; SLPP = Planning Packages
Control accounts are broken into Work Packages (near-term work planned in detail) and Planning Packages (future work not yet planned in detail). When IPMDAR data is submitted at the work package / planning package level, each SLPP also holds at least one planning package to carry its BCWS and ETC. That comes from how IPMDAR data is structured, not from published guidance.
Work Package (WP)
Measured as Discrete, LOE or AE
Each work package is measured with one earned value technique: Discrete Effort, Level of Effort (LOE) or Apportioned Effort (AE).
Frequently asked questions
Is the Total Allocated Budget always equal to the Contract Budget Base?
No. TAB should equal CBB, but it can exceed it. When it does, the program is in an Over Target Baseline, which must be approved by the customer’s contracting authority. The difference (TAB − CBB) is the Above Target Budget.
Does Authorized Unpriced Work earn fee?
Not until it is negotiated. Fee applies to the negotiated contract cost, so AUW is budgeted without fee until it is definitized. (The DOE EVMS Gold Card shows contract price as CBB + fee, which differs from DoD reporting.)
What is the difference between Management Reserve and Undistributed Budget?
Management Reserve is held back by the contractor’s program manager for program risk and in-scope unanticipated events, and it is not part of the PMB. Undistributed Budget is part of the PMB: it is budget for specific, identified scope that hasn’t yet been assigned to a control account or SLPP.
Is Management Reserve a contingency fund?
No. The DoD EVMSIG states that Management Reserve is not a contingency fund. It is for in-scope work and risk, not for covering out-of-scope changes.
Is Contract Target Cost the same as Negotiated Contract Cost?
Yes. The EVMSIG states that Contract Target Cost is synonymous with Negotiated Contract Cost (NCC).
Sources
- DoD Earned Value Management System Interpretation Guide (EVMSIG), June 24, 2026: Guidelines 8, 9, 12, 13 and 27; Figures 6 and 10 (Budget Hierarchy)
- DoD EVM Definitions (OUSD A&S)
- IPMR / IPMDAR Data Item Descriptions (Format 1 contract data)
See every term in the forProject Encyclopedia.