The earned value technique (EVT) compares the cumulative value of the budgeted cost of work performed (earned) at the original allocated budget amount to both the budgeted cost of work scheduled (planned) and to the actual cost of work performed (actual). This technique is especially useful for cost control, resource management, and production. An important part of cost control is to determine the cause of a variance, the magnitude of the variance, and to decide if the variance requires corrective action. The earned value technique uses the cost baseline contained in the project management plan to assess project progress and the magnitude of any variations that occur. The earned value technique involves developing these key values for each project scheduled activity, work package, or control account: Planned value (PV), Earned value (EV), Actual cost (AC), Estimate to complete (ETC) and estimate at completion (EAC).

The PV, EV, and AC values are used in combination to provide performance measures of whether or not work is being accomplished as planned at any given point in time. The most commonly used measures are cost variance (CV) and schedule variance (SV). The amount of variance of the CV and SV values tend to decrease as the project reaches completion due to the compensating effect of more work being accomplished. Predetermined acceptable variance values that will decrease over time as the project progresses towards completion can be established in the cost management plan. The Cost Management Plan must track and take action on any and all significant:
• Cost variance (CV)
• Schedule variance (SV)
• Cost performance index (CPI)
• Cumulative CPI (CPIC)
• Schedule performance index (SPI)

The earned value technique in its various forms is a commonly used method of performance measurement. It integrates project scope, cost (or resource) and schedule measures to help the project management team assess project performance. The ETC forecasting technique based upon the performing organization providing the estimate to complete is: ETC based on new estimate, ETC based on atypical variances, ETC based on typical variances, EAC using a new estimate, EAC using remaining budget, and EAC using CPIC.

Learning Objectives:

• Learn about Earned Value Management and its components
• Understand what it takes to implement Earned Value
• Be able to explain to others why all organizations should implement Earned Value Management techniques to help projects really know where they are in regards to the triple constraints and where they are likely to end up regarding schedule, cost, and scope

Skill Level: For Everyone