In this Earned Value Management example, suppose you have a budgeted cost of a project at $900,000. The project is to be completed in 9 months. After a month, you have completed 10% of the project at a total expense of $100,000. The planned completion should have been 15%.
Now, let’s see how healthy the project is.
From the scenario, you can extract the following:
- BAC = $900,000
- AC = $100,000
The PV and EV can then be computed as follows:
- PV = Planned Completion (%) * BAC = 15% * $900,000 = $135,000
- EV = Actual Completion (%) * BAC = 10% * $900,000 = $90,000
Intrepretation: Since the PV is greater than EV, this project has delivered less value than was planned.
Though this information is useful, you can conduct a further analysis that'll provide a clearer picture on the project costs. The fundamental Earned Value Management or Earned Value Analysis formulae set the basis analysis, such as:
Apart from these formulae, Project Cost Management has several other important concepts. Read the PM Certification and Project Cost Management article for more information.