An Earned Value Management Project Primer

Computerworld - Earned value management is based on several figures that are used to calculate a project's progress. You can measure in dollars or time.

Planned value (PV): This is the value of all resources needed to do the work to meet the project's objective. Although most project managers calculate PV in dollar terms, some calculate it in terms of time -- the number of hours it's expected to take to complete the project.

Let's take a very basic example. We've budgeted $200 to buy, set up, network and test a new system. We've budgeted $50, $75, $50 and $25, respectively, in materials, labor and other costs for those four phases.

Keep in mind, though, that the $50 set aside to buy the system doesn't just cover the cost of the actual hardware and software. It also takes into account the value of time that will be required to find the right system, the time that will be needed to fill out the purchase orders, the time it will take to actually buy the system and so on.

"The basis for earned value management is worked performed, not money spent," says Marilyn S. McCauley, owner of McManagement Group, an EVM consulting and training firm. Our PVs are $50, $75, $50 and $25.

Budgeted (cost) at completion (BAC): This is the sum of all PVs -- the total for all phases. In our example, BAC is $200.

Earned value (EV): As our team completes portions of the planned work, we check off that work and the amount of money (or time) it should have taken to do it according to the project plan. Project managers calculate EV at predetermined times based on the plan, typically at the end of the company's accounting period, McCauley says. We've completed Phase 1 -- buying the system -- within the planned time frame. Check that off as done. Our EV is $50.

Actual cost (AC): This can also be measured in dollars or time. In a perfectly executed project, EV and AC are the same. But in our example, let's say we actually used $60 in resources to buy that system. Our AC is $60.

Once you have these figures -- PV, BAC, EV and AC -- you can calculate other numbers that tell you about your progress on a project. Here are some of those calculations:

Schedule performance index (SPI): EV divided by PV for a particular phase of a project. In our example, that's 50/50 = 1, a perfect score for Phase 1, indicating that we're on target for schedule. "I said I'd do $50 worth of work, and I did $50 worth of work," McCauley says.