About Earned Value
Earned Value Project Management, or EVPM, is the best practice concerned with early comparisons between baseline or planned project data and actual or earned project data to arrive at an accurate assessment of true schedule and cost performance. The basic concepts are rooted in early Twentieth Century industrial engineering and factory productivity techniques.
You have probably already practiced at least a basic form of this technique. If you have ever verified that the work performed was actually accomplished prior to paying a contractor's invoice, you were utilizing a simple form of Earned Value. Whenever you measure the physical work performed against a baseline project plan, you are employing basic principles of EVPM. When you need a reliable way to predict the true cost performance of a project including its final costs, scheduling, and resource requirements, you will use Earned Value calculations.
Spanning industries and decades, Earned Value is also known by any of the following titles:
- Planned Value of Work Accomplished (PVWA)
- Budgeted Cost of Work Performed (BCWP)
- Cost/Schedule Control Systems Criteria (C/SCSC)
- PERT/Costs
- Earned Value Management (EVM)
- Performance Measurement
Example: Executive management wants to assess a critical project early in its schedule. The project has a planned value of 10 million dollars for 10 WBS units of equal value and is expected to last 1 year. At the end of 3 months, its actual costs are 3 million dollars, however, it has only completed 20% of the work, namely 2 units or 2 million dollars of earned value. This project is behind its baseline schedule by 1 million dollars. It is performing at 67%. The project will require a 50% increase in funding or 5 million dollars to complete the work. This is calculated based on its 10 million dollar budget divided by .67 to yield 15 million. If the project is required to return to its original time schedule, it will require additional resources and/or overtime.
Note:
For a video tutorial about Earned Value calculations, please visit the following knowledge article:
- How Is Earned Value Calculated In P6? [Video] [ID 1463443.1]
Related Topics
Last Published Thursday, February 1, 2024