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 3 Important Earned Value Management (EVM) metrics you should pay attention to.
Planned Value (PV) vs Earned Value (EV) vs Actual Cost (AC)
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 anysize.
Planned Value (PV)
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.
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.
Actual Cost (AC)
Actual cost (AC), by contrast, is calculated predominantly once work has begun. Defined as the totalcostactually 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.
Earned Value (EV)
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.
In layman’s terms, EV helps you to find the value of the work actually completed to date, and is, by far, the most important metric for finding answers to key project control questions, such as:
- Are we on schedule?
- Are we within budget?
For instance, if your project’s EV is less than its PV, you are behind schedule, but if the EV is greaterthan 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.
Read our blog for more detail on Earned Value Management.
Integrated Project and Risk Management Software
PV, EV, and AC are all widely-used acronyms within the project management sphere, which is why an in-depth understanding of what they mean, how they combine to make-up EVM, and how to leverage this information to improve project management is crucial.
At Safran, our integrated project and risk management tools incorporate a wide number of project management techniques to help managelarge capital projects. Utilizing EVM performance metrics within Safran Project, you can gain valuable insight into project health and manage complex projects from shutdown-turnarounds to large brownfield expansions.
To learn more about how Safran’s suite of integrated tools can deliver improved project scheduling, planning and controls, download our guide to managing uncertainty in project schedules.
FAQs
Earned Value Management focuses on three important data sources: The planned value (initial budget for the project) The actual value of the finished project. The earned value of the work that was completed.
What are the three key metrics of earned value management? ›
EVM is built on three metrics: Planned value, earned value, and actual cost. Think of these metrics in terms of your project budget and schedule.
What are the three components of EVM? ›
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 are the three dimensions of EVM? ›
The three pillars for EVM are: scope, budget over time and progress data. From the schedule, you can determine the Planned Value (PV) – the work scheduled to be completed by a specific date - and compare it to Earned Value (EV), the budget for the amount of work completed.
What are the 3 measures used to assess project performance in the Earned Value Management Technique? ›
Earned Value Formulas are a set of project management metrics used to assess and monitor the performance of a project in terms of scope, schedule, and cost. These formulas provide a structured way to measure a project's progress and determine whether it is on track, behind schedule, or over budget.
What are the three key process metrics? ›
There are three major categories of process metrics, which include: Static process metrics: Relate to the properties of a defined process. Dynamic process metrics: Relate to the performance of a process. Process evolution metrics: Relate to making changes within a process over time.
What are the top 3 KPIs metrics that are critical for customer support to track? ›
Which KPI is the best indicator of customer success? There isn't a single KPI that best indicates customer success. However, some of the most important KPIs you should measure are customer satisfaction scores, first response time, and customer churn.
What are the three main methods of work for EV consideration? ›
This determination begins with classifying work tasks as one of three types: discrete, apportioned effort, or level of effort (LOE).
What are the principles of EVM? ›
EVM Principles. At its essence, Earned Value is a measure of project performance comparing work completed against work planned, as of a given date. It is used to (1) measure, (2) forecast, and (3) improve project performance for an organization.
What is the basic EVM? ›
Earned value management (EVM) is a project management methodology that integrates schedule, costs, and scope to measure project performance. Based on planned and actual values, EVM predicts the future and enables project managers to adjust accordingly.
Earned Value Calculations
| • Cost Variance: CV = EV – AC | • Cost Performance Index: CPI = EV/AC |
|---|
| • Schedule Variance: SV = EV – PV | • Schedule Performance Index: SPI = EV/PV |
Earned value management analysis
To evaluate the situation of the project, you first need to calculate 3 main metrics – Planned Value (PV), Earned Value (EV), and Actual Cost (AC). If you are unsure of how this is done, check out this page about Earned value management.
What is earned value management techniques? ›
Earned Value Management refers to the discipline of applying Earned Value and Earned Value Analysis as an integral part of managing a project. Performing EVM on a project requires that the project Scope, Schedule, and Budget be integrated into a time-phased Performance Measurement Baseline (PMB).
What are the three Earned Value Analysis Formulae? ›
Earned Value Calculations
| • Cost Variance: CV = EV – AC | • Cost Performance Index: CPI = EV/AC |
|---|
| • Schedule Variance: SV = EV – PV | • Schedule Performance Index: SPI = EV/PV |
EVM Budget summary matrix
This determination begins with classifying work tasks as one of three types: discrete, apportioned effort, or level of effort (LOE).
What are the basic elements of earned value management? ›
EVM consists of the following three basic elements: Planned Value. Actual Cost. Earned Value.
What are the three variances of earned value? ›
Understanding the three types of variances – cost, schedule, and scope – is essential for project managers to effectively monitor and control project performance. By identifying variances early, project managers can take proactive measures to mitigate risks, optimize resources, and ensure project success.
