Earned Value
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Earned Value Management is a way to measure a projects performance against the project baseline. An earned value analysis can clue the project manager into trending deviations from the projects cost and schedule plans. Earned Value Management integrates cost, time, and scope completed. It is very useful in forecasting future performance.
The Terminology
Acronym
Description
Planned Value
PV is the authorized budget assigned to the scheduled work to be accomplished for a scheduled activity or work breakdown structure component.
Earned Value
EV is the value of completed work expressed in terms of the approved budget assigned to that work for a scheduled activity or work breakdown structure component. The cumulative EV is the sum of the approved budgets for activities completed during a given period.
Actual Cost
AC is the total costs incurred and recorded in accomplishing work performed during a given time period for a scheduled activity or work breakdown structure component. Actual cost can sometimes be direct labor hours alone; direct costs alone; or all costs, including indirect costs
Budget at Completion
BAC is the total amount of funds to be spent at the completion of the task.
Estimate at Completion
EAC is used by project managers to give their best estimate of the total costs of projects based on actual costs to date. The most frequently used formula for EAC is AC plus ETC; this formula is typically used when previous assumptions regarding costs are wrong.
Estimate to Complete
ETC is the expected cost needed to complete all the remaining work for a scheduled activity, a group of activities, or the project. ETC helps project managers predict what the final cost of the project will be upon completion.
Variance at Completion
VAC forecasts the difference between the Budget-at-Completion and the expected total costs to be accrued over the life of the project based on current trends.
The Formulas
Acronym
Formula
Description
Cost Variance
CV = EV – AC
CV provides the cost performance of the project to help determine whether the project is proceeding as planned. Subtracting AC from EV calculates the cost variance.
Schedule Variance
SV = EV – PV
SV indicates the projects schedule performance. This value can indicate whether the project work is proceeding as planned. Calculate the SV by subtracting the PV from the EV.
Cost Performance Index
CPI = EV / AC
For the CPI of individual budgets, divide EV by AC. For a cumulative CPI, divide the sum of all EV budgets by the sum of all ACs. A CPI of less than one indicates that the project is over budget, and a CPI of over one indicates that the project is coming in under the estimated budget.