Earned value (EV) metric

Earned value management integrates scope, schedule and cost to show how much budgeted work a project has actually completed at a given status date. It gives management an early view of progress and likely final cost rather than waiting until the project ends.

When to use it

• Answer the key performance question: “To what extent are our projects making the desired progress?”
• Assess this KPI within the Operational processes and supply chain perspective.
• Plan data collection, formula use, reporting frequency, and data-source requirements for this KPI.
• Compare results against the targets, benchmarks, examples, or trend guidance available for this KPI.

Origins

Earned value grew from industrial cost and production control and took its modern form in United States defence programmes. PERT/Cost introduced a related cost-of-work measure in nineteen sixty-two, and the Department of Defense later formalised cost and schedule control criteria. Professional standards generalised the method beyond defence by comparing planned value, earned value and actual cost against a time-phased baseline.

What it is

Perspective: Operational processes and supply chain perspective.

Key performance question: To what extent are our projects making the desired progress?

Earned value, or EV, is the approved budget value of the work actually completed by the status date. It is not the amount spent and not simply an elapsed-time percentage.

The Microsoft Project 2003 user guide described the idea as the portion of budget that should have been spent given the completed work and baseline cost. Comparing EV with planned value reveals schedule performance in budget terms; comparing EV with actual cost reveals cost performance.

The same relationships can forecast final project cost if recent efficiency continues, but forecasts should be interpreted with remaining risk, changed scope and whether past performance is representative.

How to use it

Measurement

Freeze an authorised, time-phased performance baseline. At each status date, determine planned value, assess completed work with an agreed earning rule, calculate earned value and obtain actual cost from the accounting system. Then analyse variances, indices and forecast.

Data collection method

Combine the integrated project plan, work-package progress and actual costs. Each control account needs scope, budget, schedule, ownership and an objective method for recognising completion.