A Crash Course in Earned Value Management

May 7, 2014

Blog | Project Management | A Crash Course in Earned Value Management
A Crash Course in Earned Value Management

A good project manager (PM) that can keep things moving forward, organized, and on budget is at the heart of every successful technology project. To do this, there are lots of critical numbers and statistics calculated in project management: key dates, percent complete, budget, actual cost – it can all be dizzying to monitor! While there are many different figures I care about as a PM, I’m often most interested in the Planned Value (PV), Earned Value (EV), and Actual Cost (AC) of a project. Those pieces of information are the basis for what is called Earned Value Management (EVM).

EVM is a project management concept that helps you monitor a budget and schedule and encapsulate them into nice, tidy figures. The core premise of EVM is that the value of a unit of work is equal to the amount of money budgeted to complete it. Ready to calculate the EVM of your project? You’ve come to the right place! Read on for a crash course in Earned Value Management.

In order to calculate project EVM, let’s set up a simple example project with 100 hours and $1000 budget scheduled to take 10 days (round numbers –nice and easy).

Planned Value (PV) is the budget for the work scheduled to be completed by a specified date. On day five of our example project, the PV is $500 (assuming a linear use of 100 hours). The total PV of a task is often called the budget at completion (the full $1000).

Earned Value (EV) is the approved budget for the work actually completed by a specified date. If we’ve completed 66 hours the EV will be $666 (two-thirds of the budget since we’ve completed two-thirds of the work). If EV is $666 on day five, we know that we’re ahead of schedule. We only planned to have $500 at this point in time.

Actual Cost (AC) is the cost actually incurred for the work completed by the specified date. This can be calculated in many ways, but essentially it equals X number of dollars it takes to get the work done. For our example we’ll say it has taken $750 to complete the 66 hours. This is $250 over the planned value ($500) five days into the project. We’re currently over budget!

Using these three values to understand Earned Value Management you can quickly gauge your project’s health.

Our sample project is currently ahead of schedule, but over budget. Armed with that knowledge we can react accordingly to ensure that the project comes in on time and on budget. (If only it were as easy as my example!)

David Campbell

Director of Production
  • Earned Management Value

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