Managing your project’s budget and measuring key project performance metrics is Earned Value Management. It helps you know if you can truly say “On Time and Under Budget.” The basic idea is to compare your costs with your budget in a way that takes into account project schedule. This is particularly important when you are not spending money at a constant rate.
Earned Value Management
This template understands the use of EVM formulas to run a basic earned value analysis and monitor spending over the life of a project.
Start by adding tasks to the Planned Value table and enter the amounts that needs to be spent on the tasks each period.
After you are finish defining the tasks and the budget, enter the set of tasks in the EV (Earned Value) and AC (Actual Cost) worksheets.
At the end of each period, you’ll enter a percentage that is complete for each task in the EV worksheet. The amount spent on each task during the period in the AC worksheet.
Transfer the cumulative EV and AC to the worksheet and analyze the graph, comparing the EV and AC to the Planned Value.
EVM project management
The Gantt chart is usually use in defining the project schedule (WBS, Tasks, durations, and task dependencies). While the EVM worksheet is used for planning and tracking your spending.
Earned Value Method
- Planned Value (PV): This is the Budget Cost of Work Scheduled (BCWS). When you create a project schedule, you may assign a Total Budgeted Cost (TBC) to each separate task. For long-term tasks, this cost may be spread over multiple periods and may not always be linear. So the Earned Value Management Template lets you indicate the budget cost for each period and it calculates the TBC for each task. The Planned Value is the baseline that you will compare.
- Actual Cost (AC): The Actual Cost of Work Performed (ACWP) is the amount you have spent on work, including labor and materials and other costs. The Actual Cost does not tell you anything about how much work was actually completed. It’s still a very critical number to report.
- Earned Value chart (EV): This is the Budget Cost of Work Performed (BCWP), or in other words, the value of the work complete. The project manager must come up with rules how to assign the value. In the Earned Value Management Template, the EV is calculated by multiplying the % Complete work by the Total Budget Cost.
Earned Value is
The rules you use for assigning earned value are highly dependent on how you are defining your project tasks. If you use a good work break-down structure, assigning earned value may end up a lot easier.
Earned value example
For example, if you had a task called “Purchasing” that spanned the entire project period. The planned value for that task would be highly nonlinear. You might spend $6000 at the start, then $1000 during month 2, then $2500 during month 5. The TBC for that task would be $8500. Assuming the purchases were made on schedule, the % Complete for that task as of month 2 would be ($6000+$1000)/$8500. If the actual cost of that initial purchase was only $4500, the Earned Value would still be ($6000+$1000). The $4500 would be included in the Actual Cost. That is how you end up knowing whether you are under budget.
Calculating earned value
Alternatively, the project manager may define “Purchasing” as a separate category of tasks, with each large purchase as a sub task and other sub task for miscellaneous purchases. Then, whenever each purchase is evaluated, it is a simple matter of marking the appropriate task as 100% complete.