What is the difference between earned value and planned value

Companion products. Cloud Services. Case Studies. Resources Resource Hub Blog. Contact Us. Support Contact Us. We present an example here of a situation which can be better understood through the application of EVM techniques.

As part of a larger capital development project, a civilian airport is facilitating the construction of a new shuttlebus maintenance facility, and the following plan has been laid out:. However, after the first year, only 3 stages have been completed, instead of the intended 4. Where AC is the real cost to date, and PV represents the cost estimated to have been spent by now, on 4 stages of the project instead of 3.

The EV is the expected cost of completing 3 stages of the project. It is clear that we are underperforming and over-spending. Now it is possible to calculate several key metrics for assessing the health of the project and the performance to date. We can use these 3 values to calculate variance measurements and performance indices. Stages are done, but you planned on getting done. Indices are used to measure performance on a ratio.

If you work perfectly to your plan, your index will be 1. Above 1. The schedule performance index SPI is defined as the Earned Value divided by the Planned Value and is useful for identifying schedule problems, especially when used with critical path information.

We know that PV is the financial amount equivalent to the work that should have happened according to the schedule. We do not need to take into account any actual progress or performance at this time. Next, we come to Earned Value EV. Earned Value represents what you have got for the investment in the project so far and can help you spot trends. Please keep writing! Can you please tell me how we can work out in this question?? Discuss the assumptions behind this argument.

Hi Farad, I am highly impressed with all you posts… It seems you just handpicked all the areas I had issues with…. Very simple and straight forward explanation. Got the help from you at the right time. Hi, thanks for helping out in this forum. I do understand EV from theoretical discussions but in practical terms have some few questions.

Now, for a contractor working on a project for a client. The contractor has a budget given by the client which is the PV, in respect to actual cost am a bit confused. Will the AC be the cost internal cost to the contractor or to the client, knowing that the contractor makes a margin from the client based on rate to client minus internal rate. Thanks Fahad. However, I am still concerned about the actual cost as described in my previous post.

Can you please enlighten me on that. So from my previous post it means EV can be different from client and contractor? Usually these information are given in the question itself. Otherwise you can get it with either variance formulas or the performance index formulas. Earned Value is the value of the completed work.

However, you notice that, to complete this much of work you have spend 15, USD. This is your Actual Cost. Question: When we are talking about percentage of completion are we talking with regards to output, expenditure or time? You will always measure your performance against approved plan.

The answer is not Cost Variance. What is the actual cost to date? Is the project over or under budget? What is the SV for the project? Is the project ahead of or behind schedule? You are a project manager who is in charge of an important project for your company. How is the project performing? Reason The project is ahead of schedule and under budget. This was the first article of series of few posts in cost management.

I suggest you read all articles in this series to gain understanding of cost management concepts; e. If yes, then could you please let me know how this would need to be calculated? Earn Value concepts provide you status of project and Fixed Milestone billing is way of making payment.

It is up to you that how you plan to make payment. You may make payment on monthly basis based on status report or based on some other parameters…. I saw these words in measurement and metrics analyses… When i googled it out, found your explaination most simplest one….. Thanks a lot!

Fahad, Very nice way of explaining the concepts. Anyone can clearly understands the concepts with the examples provided. This is a very useful article. Thank you!! Pavan S. Very very helpful article.. The project work is scheduled to be completed in equal amounts each month. What is the PV for this project? As the question says, the project work is scheduled to be completed in equal amounts in each month.

Therefore, the money spend till the end of third month will be three times the money spend in one month; i. I m still confused that what is the major difference between earned value and actual cost. Do correct me if i am wrong. Can we say!!! Whereas Actual Cost only gives you the realistic data.. Please correct me if iam wrong..! Thanks for the great efforts you did, the material is very easy to digest and useful. Thank you Muhammad. I always try to put concepts in simple way so that people can easily digest them.

This question has some contradictory statements. I hope you do not mind but I wanted to get in touch with you and could not find a way to directly email you. You wrote a very helpful article on this site regarding the three estimating methods and I would like to know if you know of any resources that show actual examples with each method applied.

I am trying to understand the difference between Parametric estimating and Bottom Up as both seem to provide the same output to me. Please help me to understand if there is any difference. You saved me! Me parace muy bien que nos ayuden a interpretar los conceptos de la guia del PMBOK lo leia y me era complicado enterderlo.

Very well explained, simple, straight to the point and with relevant, brief examples. Exactly what students would look for. Thumbs up. Why cant we calsulate EV from the given information???? Let us say that you have completed the project.

Just think that in this case how much you have spend, how much you have earned, and what is your planned value. This is so because at the end of your project, planned value will be equal to BAC, and about equal amount has been spent to complete it same amount is earned. Thank you so much! This was very easy, helpful and awesome explaination! In a very comprenhensible text!

No complicated long solution or words. Please my own is to ask a question. Please I am stuck on how to solve these; please could you help me out?