Construction Management

Earned Value Management | EVM Excel Template

EVM Management

Earned value management, also known as earned value project management or earned value performance management, is a project management technique for objectively assessing project performance and progress.

Planned Value (PV)

This is the first component of earned value management. Planned Value (PV) is an approved value of the work to be completed in a given time. It is the value that you should have been earned as per the schedule.

Planned Value (PV) is the authorized budget assigned to work to be done  for an activity or WBS component.”

You calculate Planned Value (PV) before actually doing the work, which also serves as a baseline. Total Planned Value (PV) for the project is known as Budget at Completion (BAC).

Planned Value (PV) is known as Budgeted Cost of Work Scheduled (BCWS).

The formula for Planned Value (PV)

The formula to calculate Planned Value (PV) is simple. Take the planned percentage of the finished work and multiply it by the project budget and you will get Planned Value.

Planned Value (PV) = (Planned % Complete) X (BAC)

Example of Planned Value (PV)

You have a construction project with a duration of 12 months. The budget of the project is 100,000 USD. Six months have passed and the time schedule says that 50% of the work should be completed.

What is the project’s Planned Value (PV)?

Given in this question.

Project duration: 12 months

Project cost (BAC): 100,000 USD

Time elapsed: 6 months

Percent complete: 50% (as per the schedule)

Planned Value (PV) is the value of the work that should have been completed so far (as per the schedule).

In this case, we should have finished 50% of the total work.

Planned Value (PV)= 50% of the value of the total work

= 50% of BAC

= 50% of 100,000

= (50/100) X 100,000

= 50,000 USD

Therefore, the construction project’s Planned Value (PV) is 50,000 USD.

Application of Planned Value (PV)

Planned Value (PV) is used to calculate the Schedule Variance and Schedule Performance Index.


Actual Cost (AC)

This is the second component of earned value management. Actual Cost (AC) is the total cost incurred for the actual work finished to date. Simply put, it’s the exact amount of money you have spent to date.

As per the PMBOK Guide, “Actual Cost is the total cost (money) actually incurred in finish work performed for an activity or WBS component.”

Actual Cost (AC) is also referred to as the Actual Cost of Work Performed (ACWP).

The formula for Actual Cost (AC)

Finding Actual Cost(AC) is the simplest of all.

There is no formula for actual cost calculation. It is an amount that has been spent and you can find it easily in the question.

Example of Actual Cost (AC)

You have a project to be finished in 12 months. The budget of the project is 100,000 USD. Six months have passed and 60,000 USD has been spent, but on closer review, you find that only 40% of the work has been completed so far.

What is the project’s Actual Cost (AC)?

Actual Cost is the amount of money that you have spent so far.

In the question, we have spent money 60,000 USD on the project so far.

Hence, The project’s Actual Cost is 60,000 USD.

Application of Actual Cost (AC)

Actual Cost is used to calculate the Cost Variance and Cost Performance Index.


Earned Value (EV)

This is the third and last element of earned value management. Earned Value is the value (money) of the work actually completed to date. If the construction project is terminated today, Earned Value will show you the value that the project has produced.

Although all three elements have their own significance, Earned Value is more useful because it shows you how much value you have earned from the money you have spent to date.

Earned Value is known as Budgeted Cost of Work Performed (BCWP).

There is a difference between Planned Value (PV) and Earned Value(EV). Planned Value shows you how much value (money) you have planned to earn in a given time, while Earned Value shows you how much value you have actually earned on the project.

The formula for Earned Value (EV)

The formula to calculate the Earned Value is also simple. Take the actual percentage of the finished work and multiply it by the project budget and you will get the Earned Value.

Earned Value (EV) = % of completed work X BAC (Budget at Completion).

Bottom Line

Earned Value, Planned Value, and Actual Cost are the three basic components of earned value management. They can be used to generate a basic summary of the status of your project. Earned Value is the value of completed work, Planned Value is the value you should have earned as per the schedule, and Actual Value is the amount spent on the project to date. If you have this information, you can look up the current status and compare it to the planned progress.

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See Also
S-CURVE EXCEL TEMPLATE
UNDERSTANDING PROJECT S-CURVE