Calculating Earned Value (EV), Actual Cost (AC), Planned Value (PV), Cost Variance (CV), and Schedule Variance (SV) are fundamental steps in Earned Value Management (EVM), a project performance measurement technique. These metrics help assess a project's progress, cost, and schedule performance against its plan.
Here's how to calculate these key EVM metrics:
Understanding the Core EVM Concepts
Before calculating the variances, you need to understand the three core values:
Planned Value (PV)
- Definition: This is the authorized budget planned for the work scheduled to be completed by a given date. It represents the baseline cost for the work you intended to have finished.
- How it's determined: PV is typically calculated from the project schedule and budget baseline. For a specific task or the entire project, it's the budget assigned to the work that was planned to be completed up to the reporting date.
Actual Cost (AC)
- Definition: This is the total cost actually incurred and recorded for the work performed on an activity during a given time period. It represents the money spent to complete the work.
- How it's determined: AC is derived from project accounting systems. It includes all direct and indirect costs attributed to the completed work.
Earned Value (EV)
- Definition: This is the value of the work actually completed up to a specific date, expressed in terms of the budget authorized for that work. It answers the question: "Based on our budget, how much value have we earned from the work we've done?"
- Formula (as referenced): EV = % of Completed Work * Planned Value
- How it's calculated: You determine the percentage of work completed for a task or project (e.g., 50% of a task is done) and multiply it by the total planned budget (PV) for that specific task or project activity.
Calculating Project Variances
Once you have PV, AC, and EV, you can calculate the key variances that indicate performance deviations.
Cost Variance (CV)
- Definition: This metric measures the difference between the value of the work earned (EV) and the actual cost incurred (AC). It indicates whether the project is under or over budget for the work completed.
- Formula (as referenced): CV = EV - AC
- Interpretation:
- CV > 0 (Positive): The project is currently under budget. The work completed cost less than planned.
- CV < 0 (Negative): The project is currently over budget. The work completed cost more than planned.
- CV = 0: The project is exactly on budget for the work completed.
Schedule Variance (SV)
- Definition: This metric measures the difference between the value of the work earned (EV) and the work planned to be completed (PV). It indicates whether the project is ahead of or behind schedule.
- Formula (as referenced): SV = EV - PV
- Interpretation:
- SV > 0 (Positive): The project is currently ahead of schedule. More work has been completed than planned.
- SV < 0 (Negative): The project is currently behind schedule. Less work has been completed than planned.
- SV = 0: The project is exactly on schedule.
Formulas Summary
Here's a quick reference table for the key EVM formulas:
| Metric | Formula | Purpose |
|---|---|---|
| Earned Value (EV) | % of Completed Work * Planned Value |
Value of work completed |
| Cost Variance (CV) | EV - AC |
Measures cost performance (Budget) |
| Schedule Variance (SV) | EV - PV |
Measures schedule performance (Timeline) |
(Note: The reference also mentions Schedule Performance Index (SPI = EV / PV) and Cost Performance Index (CPI = EV / AC), which are related efficiency indicators).
By regularly calculating these metrics, project managers can gain insight into project health, forecast future performance, and make informed decisions to keep the project on track and within budget.
