EV, AC, and PV are fundamental metrics used in project management to track and measure performance against the project plan, providing insight into whether the project is on track in terms of budget and schedule.
Let's break down what each term means:
Planned Value (PV)
- Definition: This represents the budgeted cost of work that is scheduled to be completed by a specific point in time.
- Basis: Planned Value (PV) is determined by the cost and schedule baseline. It's what you planned to spend for the work that should have been done by a certain date.
- Purpose: It acts as a baseline for comparison to see if the project is meeting its schedule targets in terms of planned spending.
Actual Cost (AC)
- Definition: This is the total cost actually incurred for the work performed up to a specific point in time.
- Basis: Actual Cost (AC) is determined by the actual cost incurred on the project. This is the real money spent out of pocket.
- Purpose: It shows how much money has genuinely been spent on the project so far.
Earned Value (EV)
- Definition: This is the value of the work actually completed up to a specific point in time, measured in terms of the project's budget.
- Basis: Earned Value (EV) tells you, in physical terms, what the project accomplished. It is the budgeted amount for the work that has actually been performed.
- Also Known As: Earned Value is also called Budgeted Cost of Work Performed (BCWP).
- Purpose: It's a crucial metric that objectively quantifies the real progress of the project in monetary terms.
Comparing EV, AC, and PV
These three metrics are the core components of Earned Value Management (EVM). By comparing them, project managers can assess the project's performance:
- EV vs PV: Indicates Schedule Performance. If EV is less than PV, the project is behind schedule. If EV is greater than PV, it's ahead of schedule.
- EV vs AC: Indicates Cost Performance. If EV is less than AC, the project is over budget. If EV is greater than AC, it's under budget.
Here's a simple comparison:
| Metric | What it Represents | How it's Determined | Key Question It Answers |
|---|---|---|---|
| Planned Value (PV) | Budgeted cost of planned work | Cost and schedule baseline | What should we have accomplished? |
| Actual Cost (AC) | Actual cost incurred for work performed | Actual costs incurred | What have we spent? |
| Earned Value (EV) | Budgeted value of work actually done | Budgeted cost of work performed (BCWP), physical accomplishment | What have we accomplished? |
Understanding the relationship between EV, AC, and PV is essential for effective project tracking, forecasting future performance, and making informed decisions to keep the project on track.
