The 4 Building Blocks of Earned Value Analysis

Earned Value analysis has a reputation for being complex with a lot of different metrics, calculations and acronyms but, in reality, at its core Earned Value analysis is a pretty simple concept. In fact, all the calculations for the standard indexes, variances and forecasting methods can be built using four simple data points. These four data points are:

  1. How much you are planning for your project to cost at the end or the Budget at Complete (BAC)
  2. How much you had planned to spend through today or the Planned Value (PV)
  3. How much of the work, from a cost stand point, have you actually accomplished or Earned Value (EV)
  4. How much have you spent or Actual Cost (AC)
With these four simple data points you can calculate most Earned Value metrics, including Cost Performance Index (CPI) and Schedule Performance Index (SPI), and from there make accurate predictions about where the project will end up. Let’s take a look at each of these data points in a little more detail.

The BAC is the total amount of budget planned for a project. If you add up everything you are planning on spending to get the scope completed on a project, that is your BAC.

It is important to note that your BAC is not the same as your funding for project. In fact earned value BAC does not even include your Management Reserve. It only includes the values that are distributed down to control accounts or planning packages or value that has scope, have not been planned yet, and are sitting in your Undistributed Budget (UB). Sometimes that concept can be confusing for folks because they look at BAC and they want to equate that to a projects funding. Those concepts are related, funding is a source for BAC, but they’re not synonymous.

The next concept is the Planned Value. This is the time phasing of the BAC and, in particular, how much of that that planned budget should have been spent at a particular point in time. For example, if I’m one month into a project then I’m only going to show my planned value equal to the amount of budget that I thought I was going to spend in that first month.

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Tags: Gevorderd , Planner , Financieelmanagement , Analyse , Rapportage
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