Planned Value (PV)
Actual Cost (AC)
Earned Value (EV)
What is Earned Value Management?
Earned Value Management
Earned Value Management relies on straightforward metrics to measure and assess the overall "health" of a project. These metrics serve as early warning signals to detect project issues promptly or evaluate project opportunities.
Earned Value Management (EVM),
It is a method used for
measuring and reporting the actual physical progress of a project
integrating the three critical elements of project management (scope, time and cost management)
It takes into account work completed, time taken, and expenses incurred to complete the project.
The cost of the work to be done is determined according to the work schedule. If we spend in any given period of time (Actual Cost – AC) and that we plan to spend at that time (Planned Value – PV) we cannot tell much about how our performance is. If we spend our planned amounts; or less, it does not mean we are performing well.
The concept of “Earned Value” is used to evaluate project performance.
Earned Value (EV); is the budgeted cost of the work done.
Current Situation Determination - Performance Measurement
In order to evaluate the performance of the project at any point in time;
Cost DifferenceCV = EV - AC
Work Schedule DifferenceSV = EV - PV
Cost Performance IndexCPI = EV/AC
Work Program Performance IndexSPI = EV/PV
values are calculated. If the differences are equal to 0 and the indexes are equal to 1, everything is going as planned. If the differences are less than 0 and the indexes are less than 1, precautions should be taken. This means that the project is both over budget and behind in the work schedule.
Work Completion Estimates
It is important for project managers and other project stakeholders to know how much and when the work will be completed.
For this purpose
Estimated Cost of Completion of Work (EAC)
Estimated Completion Time of Work (EAC(t))
trying to be determined. For these estimations, calculation methods are used according to different scenarios. The accuracy of these predictions depends on the accuracy of the current data and the probability of the assumed scenario to occur.
Earned Value Management System
The metrics and account principles used in Earned Value Management are quite simple. However, creating and obtaining the values to be used in these calculations is not that simple and easy.
In order for the earned value management to function properly, the projects;
organizational structure,
Planning, programming, budgeting processes,
Accounting processes
Analysis and reporting methods to management
Processes for reviewing and keeping information up to date
should be organized as a system.
The success of earned value management depends on the design and complete operation of this system in accordance with the characteristics of the company and the realized projects. This issue is especially important in construction projects.
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