4 Key Terms for Earned Value
From the The Money Files Blog
by Elizabeth Harrin
A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts.
Written by Elizabeth Harrin from RebelsGuideToPM.com.
Recent Posts
How to learn AI the sensible way
Making sense of project cost reports
How real PM mentoring actually works
The Accidental Product Manager: What project managers need to know
How healthy are your project finances?
Categories
accounting,
agile,
ai,
appraisals,
Artificial Intelligence,
audit,
Backlog,
Benchmarking,
benefits,
Benefits Management,
Benefits Realization,
Bias,
books,
budget,
Business Case,
business case,
business case,
Career Development,
Career Development,
carnival,
case study,
Change Management,
checklist,
collaboration tools,
communication,
Communications Management,
competition,
complex projects,
Conferences,
config management,
consultancy,
contingency,
contracts,
corporate finance,
corporate finance,
cost,
Cost Management,
cost management,
credit crunch,
CRM,
data,
data security,
debate,
Decision Making,
delegating,
digite,
earned value,
Education,
Energy and Utilities,
Estimating,
events,
FAQ,
financial management,
financial management,
forecasting,
future,
GDPR,
general,
Goals,
Governance,
green,
Information Technology,
Innovation,
insurance,
interviews,
it,
Knowledge Management,
Leadership,
Lessons Learned,
measuring performance,
Mentoring,
merger,
methods,
metrics,
multiple projects,
negotiating,
Networking,
news,
Olympics,
organization,
Organizational Culture,
outsourcing,
personal finance,
Planning,
pmi,
PMO,
PMO,
Portfolio Management,
portfolio management,
presentations,
privacy policy,
process,
procurement,
product management,
productivity,
Program Management,
project closure,
project data,
project delivery,
Project Success,
project testing,
prototyping,
qualifications,
Quality,
quality,
Quarterly Review,
records,
recruitment,
reports,
requirements,
research,
resilience,
Resource Management,
resources,
risk,
Risk Management,
ROI,
salaries,
Schedule Management,
Scheduling,
scope,
Scope Management,
security,
small projects,
Social Impact,
social impact,
social media,
software,
software,
software,
Stakeholder Management,
stakeholders,
Strategy,
success factors,
supplier management,
team,
Teams,
testing,
testing,
timesheets,
tips,
training,
transparency,
trends,
value management,
vendors,
video,
virtual teams,
workflow
Date
Whole books have been written about Earned Value, so I won’t be able to go into much detail here. However, it’s worth having a little refresher on the key terminology, and if you haven’t come across Earned Value before, hopefully this is a gentle introduction to some of the language you’ll hear often.
To recap, Earned Value is a way of assessing project progress and lets you compare performance across projects. It can help spot trends in performance. It combines scope, schedule and cost and looks at project progress holistically with all of those elements included.
Earned Value
Earned Value (EV) is the value of the work performed. It’s the word ‘value’ here that caught me out for a long time. However, once you understand the terminology, the rest of EV becomes much easier. Project Management for Dummies (yes, that’s on my shelf and I refer to it often!) defines EV like this:
The earned value of a piece of work is defined to be equal to the amount you planned to spend to perform it.
In other words, it’s the original budget for a task. I think the terminology avoids using the word ‘budget’ because this means something very specific in EV and ‘the amount you planned to spend’ could also include resource time that is not costed in the same way as buying a cement mixer or other resource.
Planned Value
Planned Value (PV) is the amount of budget that you’ve planned to use up at a particular point in the project.
The Dictionary of Project Management Terms (another of my go to reference books) explains it like this:
Sum of approved cost estimates (including any overhead allocation) for activities or portions of activities scheduled to be performed during a given period. Also called: budgeted cost of work scheduled.
Ah, ‘budgeted cost of work scheduled’. That makes a lot more sense, doesn’t it?
Actual Cost
Actual Cost (AC) is one of the easiest to get your head around: it’s the actual cost, expressed in terms of money, for the project to the specified date.
You might also see Actual Cost of Work Performed (ACWP) which relates to the total cost for doing a task or set of tasks during the time period you’re referring to. It includes direct and indirect costs, so it should be a complete and comprehensive cost for the activities.
Budget at Completion
Budget at Completion (BAC) is also quite straightforward to understand. It’s the amount you are forecasting to spend for the project at the point that the project will be finished: in other words, the total planned expenditure.
Think of it as what has been approved: it’s what your project sponsor says you can spend to get you to the end of the project, hopefully based on your realistic and practical estimates.
With these bits of information, and a few others, you will be set to start crunching the numbers and running the formulas to start producing your Earned Value information.
Posted on: January 25, 2016 11:59 PM |
Permalink
Comments (12)
Please login or join to subscribe to this item
rachel town
Kent State University Ashtabula
Ashtabula, Oh, United States
Nice refresher! Thank you!
Stéphane Parent
Self Employed / Semi-retired| Leader Maker
Prince Edward Island, Canada
Earned value is always the one that trips people. I appreciate your effort at demystifying its meaning. (I think you did a better job than Project Management for Dummies did!)
PANKAJ KUMAR JOSHI
General Manager| Transrail Lighting Limited
Nainital, Uttrakhand, India
Earn value management is a practice which confuses many but really important concept in PM
Andy Karklins
IT Project Manager| CBRE
Roselle, Il, United States
Thank you, we must always strengthen our fundamentals. Great explanation !!!
Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates
New Westminster, British Columbia, Canada
Great refresher and especially the BCWP, ACWP !
SANKAR HALDAR
SENIOR MANAGER - PROJECT CONTROL| GS ENGINEERING & CONSTRUCTION CORPORATION
Gurgaon, Haryana, India
Great Job ! EVM Simplified .
Let me share how I learnt this and now coach my juniors on this topic.
I learnt by Example and coach by Example : Honestly, that seemed the best was and still it is.
Example : if as per your current schedule, you were to pour 1000M3 concrete on a particular date,
( as per schedule = PV , planned value on that date) , you could pour 1200M3 ( this is what you have ACHIEVED so, that is your EV ) , your SV= 1200-1000 = 200 , SPI = 1.2
Values can be any convenient units , may be $ or some other unit.
At any point of time , Value as per schedule =PV
At the same point of time , what you have achieved = EV.
Fifteen years back, i found the terms bit confusing and struggled to correlate in practical terms.
Now ,I just remember those terms in terms of Schedule & Achievement.
Mohit Jain
Associate Director| Ramco Systems
Faridabad, Haryana, India
Good Article Elizabeth. Also thanks to Sankar for explaining the same in his simplified terms.
Thanks, Sankar, for sharing your ideas too! Thanks everyone for your comments.
Hamad Al-Nesf
Senior Quantity Surveyor| Public Works Authority ‘Ashghal’ – Qatar
Qatar
Equations are nothing without the numbers, Thanks Sankar, easy to follow to grasp the concepts firmly. Good article Elizabeth.
fosco frongia
Senior project manager| ENTE PATRIMONIALE CHIESA GESU' CRISTO SUG
Fino Mornasco, Como, Italy
thanks Elizabeth for refreshing these therms
fosco frongia
Senior project manager| ENTE PATRIMONIALE CHIESA GESU' CRISTO SUG
Fino Mornasco, Como, Italy
thanks Elizabeth for refreshing these therms
fosco frongia
Senior project manager| ENTE PATRIMONIALE CHIESA GESU' CRISTO SUG
Fino Mornasco, Como, Italy
thanks Elizabeth for refreshing these therms
Please Login/Register to leave a comment.
|
"Education is the ability to listen to almost anything without losing your temper."
- Robert Frost
|
