Earned Value Management (EVM) is a project planning and construction management technique that compares project performance to the project baseline. All project managers seeking Project Management Professional (PMP) certification study and memorize planned value, earned value, and actual cost formulas.
However, its application in practice varies. A project management plan PMP is a formal, approved document that defines how the project is executed, monitored, and controlled. Thus, it integrates with the Earned Value Management technique.
What is the Planned Value in Earned Value Analysis?
Planned work (value) in the project schedule that was supposed to be done at a specif time before the start of the project.
Planned Value in project management specifies how long project work is supposed to take at any given stage in the project schedule and cost estimate. Cost and Schedule Baseline applies to the physical work planned and the budget approved for the execution of the scheduled work.
Planned value(PV) in project management is the authorized budget you assign to an activity or work breakdown structure (WBS). This budget doesn’t include a management reserve.
You allocate the planned value in phases over the lifetime of the project. Albeit, at a given point in time, planned value defines the physical work that you’ve accomplished.
The total Planned Value (PV) in EVM is also known as performance measurement baseline (PMB), budget at completion (BAC), or more often as Budgeted Cost of Work Scheduled (BCWS).
Planned Value (PV) Formula
The calculation of Planned Value(PV) is simple. Take the planned % of the completed work and then multiply it by the project budget and you will get Planned Value. PV is one of the dimensions of Earned Value Management (EVM).
PV = BAC x % of Work Planned to Be Completed
Budget at Completion(BAC) ie.Planned amount the project should cost
Planned Value (PV) Example
Project ABC is to be completed in 12 months. The budget of the project ABC is 200,000 USD. Six months have passed and the 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): 200,000 USD
Time elapsed: 6 months
Percent complete: 50% (as per the time schedule)
Planned Value is the value of the work that should have been completed so far (as per the time schedule).
In this case, we should have completed 50% of the total work.
Planned Value = 50% of the value of the total work
= 50% of BAC
= 50% of 200,000
= 100,000
Therefore, the project’s Planned Value (PV) is $100,000.
PV is an important tool for calculating Scheduled Performance Index (SPI) and Schedule Variance (SV)
Conclusion
Earned value management is a key aspect of project management. The most important tools for evaluating project performance at any given time are EV, PV, and AC.
While analyzing the project’s health, the project manager must use these tools to take corrective or preventive measures. The tools are important in predicting project completion within the budget and time constraints. They would also be useful for generating project status reports for the project team.
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