June 27, 2019

Does Reality Correspond to the Plan? Earned Value as an Efficient Project Controlling Tool

The concept of Earned Value originates from financial planning and controlling but has also been used in project management for many years.

Gerald Aquila

Gerald Aquila

297 words • 3 minutes

Share on: Auf LinkedIn teilen Tweet Auf Facebook teilen

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 (specific date) x % (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).

earned-value-diagramm

  • 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 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).

earned-value-hoeher

earned-value-niedriger

Not that complicated and a very good tool to visualize the progress of your project over time, isn’t it?

Relevant Project Management Terms

Control / Controlling  

Controlling basically means taking measures to implement the project plan as accurately as possible. In doing so, deadlines, costs and results should be within the previously defined tolerance range.

Earned Value Analysis  

The Earned Value Analysis is used to evaluate the progress of projects. The current scheduling and cost situation is expressed by the planned value, the actual value and the earned value.

Project Controlling  

Project controlling describes all activities that are necessary to control a project over its entire duration. Project controlling is therefore responsible for comparing the project goals, the planned budget and the defined quality with the current project, investigating deviations for their causes and proposing countermeasures.

Glossary