What Is the Earned Value of a Project?
An Earned Value analysis evaluates the project progress in relation to the planned goal at a specific point in time.
Many people think that Earned Value (EV) is a very complicated concept because it is often described with formulas rather than words. Now let's take a closer look at the calculation.
How to Calculate the Earned Value
The easiest way to calculate the EV is to multiply the planned value (PV) by the percentage of project completion - at a specific date. And this is the way, most project management tools do calculate the value achieved.
Here is the calculation formula for completeness:
EV = PV x %
EV: Earned value
PV: Planned value (on a specific date)
%: Percentage of completion
How the Earned Value Chart Works
Now let's focus on the EV diagram for a simple, practical explanation. There are three lines in the graph: Planned Value (PV), Earned Value (EV) and Actual Value (AV).
- Planned value (PV) shows the cumulative value of the planned work over a certain period (cost or effort)
- Earned value (EV) shows the cumulative value of the planned work that has already been completed over time (cost or effort).
- Actual Value (AV) shows the accumulated value of the actual costs incurred or costs at a given time.
If the earned value obtained is equal to or higher than the planned value, you are on schedule (or even better - shown in green); if the score is less than the planned value, you are behind schedule (not so good - shown in red).
Not that complicated and a very good tool to visualize the progress of your project over time, isn’t it?