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Earned Value and Planned Value

How are earned value and planned value calculated? Why are these numbers important?

Earned value and planned value measure task completion against scheduled work to compare time, cost and schedule performance for the work plan. Project Insight calculates these values as follows:

Earned Value = Work Total Cost x Percent Complete Work

Planned Value = Work Total Cost x Percent Complete Duration through yesterday

A simple example can be made for a planned four-hour task with a cost budget of $400, a duration of four days, a scheduled start date of three days ago and 50% of the work has been completed within one hour:

Total Work = 4 hours at $400

Percent Complete Work = 50%

Earned value cost = 2 hours at $200

Actual hours cost = 1 hour at $100

Planned Value = 3 hours at $300 (75% complete duration as three of the four planned days have passed)

The example above is representative of a situation in which efficiency was optimized for accelerated earned value ($100 actual cost vs. 2 hours of completed work). At the same time, the task is behind schedule because 75% of the scheduled duration has passed as of yesterday and only 50% of the work is complete.

Similar analysis for schedule status based on % complete is covered in the Forward Progress FAQ.