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 Earned Value Management (EVM).
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 any size.
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 total cost actually 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 greater than 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.
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 manage large 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.