Planned value
| Planned value |
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Planned Value (PV) is a term used in Earned Value Management is the baseline cost estimated up to the status date used[1]. That value includes all the relevant costs in the project or any given part of the project[2].
What Includes Planned Value
It was originally called the Budgeted Cost of Work Scheduled. Now it has been simplified to Planned Value. It records four key things[3]:
- How much work will be required to carry out the project;
- How long it will take to complete the work;
- When it will be completed;
- How much it will cost.
At the set up of a project, the Planned Value represents the total estimated Earned Value of the project. It is also referred to as the Budget at Completion (BAC). However, Planned Value is time-based and because of that Planned Value at any given point in time (the status date) will be the cumulative planned cost of the project up to that status date[4].
Difference Between Planned Value and Earned Value
Earned Value is another value important in Earned Value Management. In the case of calculating Planned Value, we haven't done the work yet, so we are looking ahead. Earned Value is a backward look. It tells us how much work a team has completed so far in worth, in the same monetary terms as Planned Value[5].
If the Earned Value is greater than the Planned Value, it results in a positive schedule variance. For example, schedule variance equals EV ($6,000) minus PV ($10,000), which stands for -$4,000. The negative schedule variance means that the project is behind schedule[6].
Developing Planned Value
Planned Value is developed through the following five steps[7]:
- Development of a Work Breakdown Structure (WBS), to determine all of the Work Packages that need to be carried out to complete the project successfully;
- Estimate the amount of Work Effort each of the Work Packages will require to complete it;
- Convert the Work Effort into a monetary value which represents the financial cost of performing the Work Package.
- Schedule when each of the Work Packages will need to occur, based on duration and when it is required;
- Plot the Planned Value onto a graph with the Monetary Value on the vertical axis and time on the horizontal axis.
As the amount and timing for all the Work Packages have been established, the Planned Value for the project should be set or baselined. The baseline for tracking purposes is referred to as the Performance Measurement Baseline. It should then only be changed by implementing formal project changes[8].
Footnotes
References
- Biafore B. Stover T.(2012), Your Project Management Coach, John Wiley and Sons, Hoboken
- Carroll J. (2017), Earned Value Management in easy steps, In Easy Steps, Holy Walk
- Furman J. (2014), The Project Management Answer Book, Management Concepts, Vienna
- Venkataraman R. Pinto J. (2011), Cost and Value Management in Project, John Wiley and Sons, Hoboken
Author: Michał Dembowski
