Earned Value Analysis
Earned value is a key indicator of overall project status. It facilitates an objective assessment of variance between plans, budgets, and performance and enables a common understanding of the amount of work actually completed. Earned value is a moment-in-time metric.
Researchers have found that two of the components of earned value, schedule variance and cost variance, are valid indicators of performance after 20% of the project is underway. At that point, these two metrics can give you an accurate total picture of the project.
Both schedule variance (SV) and cost variance (CV) are used to pinpoint potential project problems, which can then be investigated further. Positive numbers are generally good and negative numbers are usually bad. A positive SV means the project is ahead of schedule; a positive CV means the project is under budget. Be aware, however, that these indicators cannot isolate activities on the critical path.
SV answers questions like, What is the difference in value between what was accomplished and what was scheduled? The formula for SV is:
SV = EV - PV
Notice that EV is used in the equation. In real life, SV is a reflection of what has been accomplished, the EV; versus what was planned, the PV. It does not, however, consider what has actually been spent.
If the SV is positive, then more work has been completed than what was scheduled, and the project is ahead of schedule.
If the SV is negative, then more work was scheduled than has been performed, and the project is behind schedule.
The Cost Variance (CV) answers the question: What's the difference in value between what was accomplished and what was spent to do it?
The formula for CV is:
CV = EV - AC
Again, notice that EV is used in this equation. CV is a reflection of what has been accomplished, the EV; versus what was actually spent, the AC. It does not consider what was planned to be done.
If the CV is positive, then the costs were less for the actual work than what was budgeted, and the project is under budget.
If the CV is negative, then the costs were more than budgeted for the work actually accomplished, and the project is over budget.
Percent Complete is a measurement that compares the value of the work accomplished with the total amount of work that needs to be done. The formula for Percent Complete is:
Percent Complete = EV / BAC
Percent Spent is a measurement that compares the money that has been spent with the total amount of money available. The formula for Percent spent is:
Percent Spent = AC / BAC