Earned Value – Why do I need it?
To paraphrase the words of the Project Management Institute’s standard, when I rely only on a project schedule of tasks, finish dates, and % complete, I will not know where the project is or where it is going. I will simply know where the project was supposed to be and where it is supposed to be going.
What is Earned Value?
Earned Value Management (EVM) is a technique that looks at the relationship between a) actual cost expended, and b) actual work completed, and compares this to c) original budget and work timeline.
More formally, the three data points you must understand and memorize are:
a) Actual Cost (AC) – What amount of resources have been expended to complete the work at a given point in time.
b) Earned Value (EV) – Snapshot of work completed at a given point in time.
c) Planned Value (PV) – The Baseline – How far along the project work is supposed to be at any given point in the project schedule.
How do I implement Earned Value? (My cheat sheet below)
Step 1 (Planning)
- Create a Work Breakdown Structure.
- Ensure all tasks on the schedule are assigned.
- Estimate time to complete each task.
- Determine how you will determine that tasks are complete as the project progresses.
Step 2 Periodic monitoring
- Obtain cost and / or hours expended.
- Obtain status on task completion.
- Forecast Cost and Schedule performance.
My usual workflow is to enter the planned and actual data into MS Project and then export the time-scaled data to an excel chart. An excel chart (example below) isn’t required, but I highly recommend it as a support to your table of data – a picture is worth a thousand words.
Combine the data into actionable forecasts
By using Earned Value techniques, you use Project Management discipline to provide key feedback and forecasting to the project team and executives. See four sample questions and formulae below.
Earned Value is not sensitive to the quality of the deliverables. You can be near the end of the project and forecast on budget and on schedule even if the deliverables are poor and the customer will not accept the final product. The expectation is that the PM is using other tools and techniques to manage and control quality.