Earned value (EV)
Earned value represents the value of the actual work completed to date. Imagine your client asks you to stop all work on the project today, EV tells you the value your project has generated so far.
Earned value formula
To calculate earned value, we multiply the percentage of completed work (actual) by the project’s budget (BAC).
EV = (actual) % complete x BAC
Now let’s run through some examples:
1. We spent $12,500 in our first month, but we only completed 20% of our project when we should be at 25%.
E.g.
- Project duration: 4 months
- BAC: $40,000
- Elapsed time: 1 month
- Planned value: $10,000
- Actual cost: $12,500
- (planned) % complete: 25%
- (actual) % complete: 20%
EV = % complete (actual) x BAC
EV = 20% x $40,000
EV = $8000
The value of the work done is $8,000 but we have spent $12,500.
2. So, we spent $27,500 in three months. All our activities scheduled up to our data date have been completed.
E.g.
- Project duration: 4 months
- BAC: $40,000
- Elapsed time: 3 months
- Planned value: $30,000
- Actual cost: $27,500
- (planned) % complete: 75%
- (actual) % complete: 75%
EV = (actual) % complete x BAC
EV = 75% x $40,000
EV = $30,000
*The value of our work complete is $30,000 despite only spending $27,500.
You can learn more about Earned Value Management here.
