What is earned value in plain words?
Earned value compares the work done with the work planned and with the money spent. It shows if a project is ahead or behind on time and over or under on cost.
Three numbers, two checks
- Planned value: the budget for the work due by today.
- Earned value: the budget for the work actually done by today.
- Actual cost: the money spent so far.
Schedule check: divide earned value by planned value. Below 1 means behind. Above 1 means ahead.
Cost check: divide earned value by actual cost. Below 1 means you are paying more than planned for the work done. Above 1 means you are under.
Checklist to start
- Split the job into tasks, each with a budget.
- Set a planned finish date for each task.
- Agree a rule for percent complete before work starts.
- Take actual cost from the ledger each week or month.
- Work out both checks and compare them with last time.
You do not need special software. A table of tasks, budgets and percent complete is enough for a start.
A simple rule for percent complete stops guessing. One common rule counts a task as 0 percent until it starts, 50 percent once it starts and 100 percent when it is done.
A short example
Say a steel fabrication shop has a job for 40 frames. The plan says 20 frames should be done by today, with a budget of 1,000 units for those 20. Only 16 are done, so earned value is 800. The shop has spent 900.
Schedule check: 800 divided by 1,000 is 0.8, so the job is behind. Cost check: 800 divided by 900 is about 0.89, so each frame costs more than planned.
The two checks point to different fixes. Being behind may need more shop hours. Being over cost needs a look at why each frame takes longer, such as rework.
Related answers
Questions
Is earned value only for large projects?
No. The method works on any job that has a budget and a plan. Smaller jobs can use a simple table.
What is the hard part?
Measuring percent complete honestly. Agree a rule for it before the job starts.
Need this done for your project?