Earned value management (EVM), also known as earned value analysis, is a method for tracking ongoing construction project performance. One of the best methods in use today, it relies on three different numeric values to calculate your construction project’s progress: planned value (PV), actual cost (AC) and earned value (EV).
What does EV stand for in project management?
Earned valueEarned value (EV) is a way to measure and monitor the level of work completed on a project against the plan. Simply put, it's a quick way to tell if you're behind schedule or over budget on your project.
What is AC in project management?
Actual Costs (AC) is simply the money spent for the work accomplished. This is also known as the actual cost of work performed (ACWP). Earned Value (EV) is the percent of the total budget actually completed at a point in time.
When AC is below PV and EV is above PV?
For instance, if your project's EV is less than its PV, you are behind schedule, but if the EV is greater than the PV, you are ahead of schedule. And in much the same way, your project's EV can be compared to its AC to determine whether you are above or below project budget.
What is SPI EV PV?
The schedule performance index (SPI) is a measure of the conformance of actual progress (earned value) to the planned progress: SPI = EV / PV. In both of the above formulas, a value of 1.0 indicates that the project performance is on target.
What is the difference between EV and AC?
The Actual Cost “AC” is the budget that has been consumed to date. The Planned Value “PV” is the amount of budget that was allocated to be consumed to date. The Earned Value “EV”, is the amount of work the project has completed in reference to the original project budget “BAC”.
What is PV budget?
Planned value is defined by the Project Management Institute (PMI) as “the authorized, time-phased budget assigned to accomplish the scheduled work” or simply put the project cost over time baseline which can be measured at any point in the schedule.
How is CV calculated in project management?
The cost variance is defined as the 'difference between earned value and actual costs. (CV = EV – AC)' (PMI, 2004, p. 357) Sometimes this formula is expressed as the difference between budgeted cost of work performed and actual cost work performed. If the variance is equal to 0, the project is on budget.
What is PV curve in project management?
Whenever the project is planned then the curve plotted between the cumulative planned expenditure of the project with respect to time line is called PV (Planned Value) Curve. It is to be ensured that the expenditure done on the project must follow this line values.
What is difference between earned value and planned value?
Planned value provides a baseline measurement of delivery value over time that can be achieved based on the original project plan. Earned value uses the same valuation method but represents the work that is actually completed, or earned.
How do you calculate PV EV and AC?
Calculating earned value Planned Value (PV) = the budgeted amount through the current reporting period. Actual Cost (AC) = actual costs to date. Earned Value (EV) = total project budget multiplied by the % of project completion.
What is SPI in agile?
The Cost Performance Index (CPI) and Schedule Performance Index (SPI) give a measure of efficiency. They show how efficiently you are actually spending your budgeted costs and time as compared to how efficiently you have planned to spend them.
How do you calculate CPI from PMP?
Calculating Cost Performance Index Using the formula CPI = EV / AC, the project manager will have a value of less than 1 (project over budget), of 1 (project on budget), or greater than 1 (project under budget). CPI in project management measures the cost efficiency of a project.
What is EV in construction?
EV is a measure of work performed or the budget authorized for that work. In other words, it’s the budget authorized for completed work. The value of EV cannot be greater than the authorized PV budget for a component.
Why is EV important?
From the image above, you can see that EV is a very important instrument in evaluating project performance. Beyond assisting the project team to understand the project’s health, it helps bring the project back on track in case of any deviations or variations from the plan.
What is total PV?
The total PV is also known as performance measurement baseline (PMB), budget at completion (BAC), or more often as Budgeted Cost of Work Scheduled (BCWS).
What is the EVMS method?
This method that the team employs here is the Earned Value Management System (EVMS).
What is cost variance?
Cost Variance has a direct relationship with the project budget. It’s the amount of project budget deficit or surplus at any given point time. This also helps in the prediction of the budget at project completion.
What does SV mean in a project?
SV= positive, project is progressing ahead of the planned schedule
What is earned value management?
Earned value management is an important aspect of project management. EV, PV, and AC are the most important instruments in assessing project performance at any given point in time.
What is earned value management?
Earned Value management is a project management classic that began in the 1960s with the US Air Force. Another project management tool that was also inspired by the military is VUCA.
What is earned value?
1. Earned value represents the amount of the work that's actually completed. It's the value the project has produced. It will allow you to compare the work that has been completed with the planned costs of your project. This calculation will allow you to objectively and quantitatively measure the success of your project.
What is PV in construction?
PV is the estimated value of the work packages planned to be completed in 3 month . 3 work packages were planned to be completed in 3 months. The estimated value of each work package is $100,000. Therefore, PV = 3 x $100,000 = $300,000.
What is the value of EV?
EV is the estimated value of work packages actually completed. 2 work packages were actually completed and their value is 2 x $100,000 = $200,000
What is the difference between planned and earned value?
Planned Value is the estimated (monetary) value of the work planned to be done, whereas Earned Value is the estimated (monetary) value of the work actually done.
How long does it take to complete a project?
A project has a total budget of $100,000 and is estimated to take 10 months to complete. After 5 months, it is estimated to complete 50% of its work at the cost of 60% of its budget, but it actually accomplished only $40,000 worth of the work, and spent 50% of its budget.
Is AC a straight forward concept?
As such, the concepts are pretty straight forward but when applied to exam questions, things get tricky. Most people don’t have a problem in understanding Actual Cost (AC). Let’s apply the above trick to sample questions.
What is PV in EVMs?
The first of the EVMs metrics is planned value (PV). Defined by the PMBOK Guide as the authorized budget assigned to work to be accomplished for an activity or WBS component, PV is work scheduled to be completed over a given time.
What is EVM in project management?
At its most basic, EVM is a collection of objective and reliable productivity metrics that can be used to establish scope, budget over time, and progress to completion. Comprised of planned value (PV), earned value (EV), and actual cost (AC), it lets you accurately compare performance across any project of any size.
What is the final EVM?
The final EVM metric is, unsurprisingly, earned value (EV) and is defined as the value of work performed, expressed in terms of the approved budget assigned to that work for an activity.
How to determine PV?
PV can be determined by analyzing the schedule and multiplying the planned percentage of the completed work by the project budget. These calculations are carried out before any work takes place and acts as a baseline for your project.
What is AC in construction?
Defined as the total cost actually incurred in accomplishing work performed for an activity, AC is simply the amount of money you’ve spent so far and can be attained by simply analyzing the schedule.
Is EV ahead of schedule?
For instance, if your project’s EV is less than its PV, you are behind schedule, but if the EV is greater than the PV, you are ahead of schedule.
Is capital project management complex?
The world of capital project management is filled with complexity. From an overabundance of abbreviations to a fistful of formulaic equations, it’s easy to find yourself lost in translation. But by taking a complex topic and analyzing its constituent parts, understanding can be improved. Here we examine Earned Value Management (EVM).
What is earned value management?
Earned value management (EVM) is a technique to measure a project’s performance and progress. It is a tool to help project managers make informed decisions during a project’s lifecycle. There is more than one way how project managers can calculate projects progress.
Earned value project management
To successfully use the EVM technique there are minimum requirements to have:
Earned value management formulas
There are many more formulas than just a single EV. Closer to the final list looks like the following table.
Summary
There are many project management methodologies as well as stand-alone tools to guide project managers to successful projects. EVM is just one of the tools and should be used because of its benefits while rationally assessing other existing alternatives.
What is EVA in PMI?
Earned Value Analysis (EVA) is a technique used in project management for monitoring and controlling purposes . Several processes of the PMI methodology refer to this technique (read more below) which belongs to the data analytics group of techniques (source: PMBOK®, 6 th edition, part 1, ch. 4.5.2.2, p. 11).
What is EVM supplemental approach?
A supplemental approach to EVM is Earned Schedule Management which focuses on the measurement of schedule variances and trends separately from the value and cost performance (source: PMBOK®, 6 th edition, p. 233).
What is earned value analysis?
The goal of the earned value analysis is to support and facilitate the control cost process. The results of this analysis are used for Earned Value Management (EVM) which analyses variances, trends and forecasts based on the EVA results. Read more about these uses in the EVM section below.
What does a positive variance in a schedule mean?
The schedule variance compares the earned value with the planned value for the respective period. A positive value indicates that a project is ahead of the plan.
What is cost variance?
The cost variance indicates the difference between the earned value and the actual cost. If the earned value exceeds the actual cost, the cost variance has a positive value (and the other way around).
What is variance at completion?
The variance at completion refers to the difference between an initially authorized budget (BAC) and an authorized estimate at completion (EAC).
What is planned value in accounting?
The planned value is the share of the budget (excluding management reserve) assigned the activities or periods in the scope of the analysis.
Fundamentals of Earned Value Management
Earned Value Management helps you find project status and measure project progress. To understand the fundamentals of Earned Value Management, please refer to the 32 guidelines defined under the EIA-748 standard.
Benefits of Earned Value Management
EVM offers immense benefits to project managers, sponsors, clients, and organizations.
Earned Value Management vs Traditional Project Management
Project managers used to have two parameters: planned expenditures and actual expenditures in the past.
Summary
EVM helps analyze the project’s performance and predict the forecast. It provides you with quantitative data for decision-making. It is an excellent communication tool for project stakeholders because it helps them understand the project’s insights.
What happens if EV is above PV?
If the EV line is below PV, the project is behind schedule; if EV is above PV, the project is ahead of schedule.
What is EVA in project management?
Earned Value Analysis (EVA) — a quantitative project management technique for evaluating project performance and predicting final project results, based on comparing the progress and budget of work packages to planned work and actual costs.
What to expect when preparing for PMP exam?
When preparing for the PMP® certification exam, it would be wise to anticipate questions related to earned value calculations. You may not be asked to specifically calculate each of these metrics for the exam, but you should understand what they mean for your project.
What is earned value management?
Earned Value Management connects cost and schedule data for a project to answer the question of: “Is the project behind, on, or ahead of schedule?” The Earned Value assumes:
What is earned value?
The Earned Value concept is centered around data-driven insights into the project progress and projections as measured against the original plans of timeline and costs. The earned value calculations are simple mathematical calculations that are only as accurate as the data used to complete the formula. Within the PMI.org library is Reichel’s whitepaper “Earned value management systems ” in which definitions are provided for EV concepts:
Can a PMP do earned value calculations?
Any project manager or PMP®credential holder could do earned value calculations. However, without “ complete earned value management in use on your project, it will be extremely unlikely to obtain correct results .” If you have faulty data, your calculations may be mathematically correct but not accurate in terms of assessing or predicting the project’s progress.
What is EV in accounting?
Earned Value (EV): % complete x BAC. That is percent complete from progress measurement multiplied by the budget at completion. Additionally, one can use the sum of planned value (PV) of all completed tasks to date.
What is earned value?
Earned value is the most effective and accurate technique for measuring a project’s performance. Calculating earned value (EV) in project management for measuring progress and performance can be done in many ways. Every project is different, and each project may measure progress differently.
What is ETC in construction?
Estimate to Completion (ETC): Calculated as EAC – AC; or by creating a new bottom-up estimate of all work remaining.
What is TCPI in EAC?
To Complete Performance Index (TCPI): TCPI is used to calculate the cost performance that must be achieved to hit the cost target. When using EAC the formula is: (BAC – EV) / (EAC – AC).
Project Cost Management
Earned Value Management System
Planned Value
Earned Value
Actual Cost
Application of Ev
Practical Limitations
Summary
- Earned value management is an important aspect of project management. EV, PV, and AC are the most important instruments in assessing project performance at any given point in time. The project manager must use these tools to take necessary corrective or preventive measures while analyzing the project’s health. The tools play a vital role in predict...