Earned Value for Dummies Part 2 - The ‘Earn’ in Earned Value.

In the previous article we looked at a simple metric called the variation at completion (or the VAC as it is shortened to) which simply compared the budget at completion (BAC) to the forecasted cost at completion (EAC) to get a figure which indicates a forecasted budget overrun/underrun on the project.

Now let’s look at the ‘earned value’ of the work completed thus far on the project to calculate project performance.


The Earned value is how much of the current cost have been “earned” on the project.


The earned value is simply the total budget (sum of PV or BAC) divided by percent complete (how much of the work has been done). By comparing the Earned value with the Planned Value you get a cost variance which is used to calculate how you are tracking to budget. A positive cost variance is good, negative bad. Let’s look at the example from the first article.


After Johns disastrous second week when he lost his laptop and caused a two week overrun (as he had to re-do his work) John completed the task. Note how at the end of the second week his Earned Value was $0 i.e. he hadn’t earned any of the cost yet as he had not done any of the work.



This cost relationship can be illustrated in a graph to show the trends in the earned value against Actual and budget costs over time (see below)




In the Next Article “Exotic Earned Value” will take a look at the more exotic earned value calculations namely the Schedule Variance, the Schedule Performance Index the Cost Performance Index and the Cumulative Cost Performance Index.