Earned Value in Your Project

Earned value is a concept that helps you measure how far you are along in your project. It is a good measurement to use for some projects because it can give you a quick understanding of whether your project is in trouble or not. Earned value measurement will tell you exactly how far off track your project is.

To be able to apply a measurement of earned value, you must be able to assign a value to every aspect of the project. This means you will have a budget for the work that people do, the resources that will be used. Having a concise budget for people and resources is a good place to be because it tells you exactly how much time you will spend and what level of quality you can afford. With a budget, schedule(time) and level of quality, you now know how much work you can do on your project. (The amount of work is the scope of the project.)

Earned Value

Earned value is the amount of budget you have spent on your project. It is handy because you can measure what you have really ‘earned’ and what you expected to earn. This tells you whether your project is on track or not.

If you are all the way through your project, you expect the earned value to be 100% of your budget. (You have used up all of your resources and time by the time you are done.) If you are part-way through the project, the earned value is the ending budget pro-rated to whatever part of the project you have completed. If your expected ending budget is $100 and you are 50% of the way through the project, you would expect the earned value to be $50.

Expected Earned Value Compared to Actual Earned Value (Schedule Value)

As your project progresses, you might find that your actual earned value is not precisely what the expected earned value to be. If you are doing the project above with a budget of $100 and you are 50% of the way through the project timeline, but you have only spent $40 on wages because someone called in sick, then you are behind on where you expected to be. And this might be a problem. Even though you are under-budget on the whole project, you are not where you supposed to be. You expected to have spent (‘earned’) $50 for the project at the half-way point. At this point, the project has only used $40. You might feel that you are under budget, but you are behind on your project. You are behind on spending for this project by $10. This is a good indicator that you are behind in general.

Don’t be fooled into thinking that being under budget is a good thing. The only time this is a good thing is when you are under budget, and the project is complete. If you have planned right, you should always be right on the budget for each step of your project.

Schedule Value Formula

There are plenty of formulas that can tell us useful information about the project status concerning the Earned Value. The example above is the Schedule Value formula. The formula is:

Schedule Value = Earned Value minus Planned Value

Planned value is the total project budget multiplied by the percentage that the project is complete.

Here are some examples for our $100 project:

Example 1

If your earned value is $70 and your project is at the 80% complete mark your schedule value is

SV = $70[Earned Value] - $80[Planned Value]
SV = $ -10

You are behind on your schedule by $10. It’s time to catch up.

Example 2

If your earned value is $65 and you are 45% of the way through the project.

SV = $65[Earned Value] - $45[Planned Value]
SV = $ 20

You are 45% of the way through the project. Even though you have spent more money than you expected at this point, you are ahead in your project. You expected to have $45 worth of work done; in reality, you have $65 worth of work done. You have completed more work than you expected to by this time.

Summary

Schedule variance and earned value can be hard concepts to grasp. In short Schedule, Variance can be described as:

The cost of the work that is done compared to what you had expected to be done.

If you have delivered more value than you thought you would by this time, you are ahead. Otherwise, you are behind.