课程: Project Management Foundations: Budgets

The earned value approach

课程: Project Management Foundations: Budgets

The earned value approach

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- My lovely daughter, like most kids, was famous for the line, "Are we there yet?" When I suggested because we're still heading down the highway that we most certainly were not, she'd reply with, you guessed it, "So how much longer?" Not to compare my project sponsors with children, but when managing projects, I often hear this question. And it's pretty reasonable. Knowing where you are on the project journey makes everyone feel more in control. The earned value approach, also called earned value analysis, calculates how much a project has earned based on the tasks you've finished. Suppose 30% of your project's duration has passed and 30% of the budget has been spent. Sounds like things match your plan, right? But if only 15% of the work is done, you're in trouble. You must finish 85% of the work but with only 70% of the time and money left to do it. That's not a happy situation at all. Earned value leverages three metrics. First, you measure planned value, or PV, and that's how much you plan to spend to complete the tasks scheduled at any given point. If you planned on spending 50% of your $20,000 total budget two months into your project schedule, the planned value at that point is $10,000. The second measure is called earned value, or EV. That's the cost you allocate to tasks delivered at any point. If the planned cost for the completed task is $3,000, the earned value is $3,000. The third measure is the actual cost, or AC. For example, if you had to hire a contractor because one of your staff members resigned, the actual cost of completing tasks would be higher than planned. So the tasks you plan on costing 3,000 might have cost 4,500. Let's plot these figures on a graph to make the analysis easier to understand. Time is represented on the X axis and dollars are on the Y axis. The blue line is the planned value, or PV. The black line is the earned value, or EV. And finally, the red line represents the actual costs, or AC. The lines represent the status we've discussed, and we can see we have a problem. The actual cost exceeds our earned value by $1,500, so we are over budget. We also accomplished less than expected because our earned value was $3,000. But we planned on completing $4,000 worth of tasks. Check out the earned value possibilities exercise files I've included in this course. It shows all the project status possibilities and how they appear on an earned value graph. It's a pretty good way of answering the question, "Are we there yet?" and "How much longer?"

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