Planned Value in Project Management

Managing projects can be very tricky as it involves various aspects which have to be carefully integrated to achieve success.

There’s a lot of planning, executing, and monitoring to make sure everything goes according to plan and the project is delivered within the project constraints which include scope, schedule, and budget.

When managing a project, a key technique to use to measure progress and performance is Earned Value Management (EVM).

This technique uses various metrics in doing this including Earned Value (EV), Planned Value (PV), Cost Performance Index (CPI), and Schedule Performance Index (SPI).

This post will provide information on Planned Value in project management, how to calculate it, and its significance for your project.

What is Planned Value in Project Management?

Planned Value (PV) in project management is a term that refers to the estimated value of the work planned to be completed during a certain period. This can also be called the budgeted cost of work scheduled (BCWS).

It’s the amount of work that should have been completed by a certain point in time, according to the project plan.

It’s usually measured in currency and is calculated by taking the planned percentage of work completed and multiplying it by the total budgeted cost of the project.

PV is important because it helps in tracking and measuring the progress and performance of the project when compared to the project plan.

By comparing the PV to the actual cost and schedule performance, managers can identify any issues that might arise and take steps to get the project back on track.

Planned Value (PV) Formula

Planned Value (PV) = Percentage of work planned to be completed x Budget at Completion (BAC)

In this formula, the planned percentage of work completed refers to the percentage of work that was planned to be completed up to a specific date or time period, according to the project schedule.

The Budget at Completion (BAC) refers to the total planned cost for the project.

How to Calculate Planned Value (PV)

Now that you know the Planned Value formula, it’s important you also know how to use it to calculate the value. Let’s use an example for context and clarity.

Assume you are managing a project that has a budget of $100,000 and the plan is that 25% of the work would be completed at the end of the first month of the project.

Then the PV can be calculated as follows:

PV = 25% x $100,000 = $25,000

The implication is that based on the project plan, $25,000 worth of work should have been completed in the first month of the project.

Why is Planned Value Important in Project Management?

Planned Value (PV) is an important project management metric. As a project manager, it will tell you how much work should have been completed at a given point in time according to the project schedule.

Here are a few reasons why PV is important in project management:

1. Provides a Performance Benchmark

PV gives a benchmark against which the actual progress and cost of the project can be compared.

This way, you have a clear idea if the project is going according to plan, ahead of schedule or behind, and take corrective action if necessary.

2. Facilitates Project Forecasting

PV is also helpful in forecasting the future performance of the project.

By comparing the PV with other metrics like actual cost and schedule performance, you can forecast the project’s future performance if the project work continues at the same rate.

3. Enables Project Control

PV is also an important metric for monitoring and control of projects. It helps identify deviations from the project plan so that actions can be taken to control the project back on track.

4. Helps to Identify Potential Risks

As earlier iterated, PV helps to identify risks early on so that the root cause of the deviation can be investigated, and corrective action is taken.

If the PV is lower than expected, this could signify there are potential problems.

Planned Value (PV) vs Earned Value (EV)

Now you have a clear idea of what Planned Value (PV) is in project management, another thing you need to understand is how it differs from Earned Value (EV) which is another important metric used for Earned Value Management (EVM).

PV represents the planned cost for the work that should have been completed up to a specific point in time, according to the project schedule.

EV, on the other hand, is the value of the work that has actually been completed up to a particular date.

While PV is an estimation of the planned cost, EV is an actual measurement of the work completed.

The primary difference between the two is that PV tells you what should have been done, whereas EV tells you what has been done.

By comparing PV with EV, you can determine whether the project is on track or not. If the EV is higher than the PV, it means that the project is progressing well and that the work is being completed ahead of schedule.

However, if the EV is lower than the PV, it indicates that the project is running behind schedule, and the work is not being completed as planned.

The difference between them EV – PV = Schedule Variance (SV)

Conclusion

Planned Value is a crucial tool in project management for tracking a project’s progress and measuring its performance.

Integrating it with other Earned Value Management formulas can assess the project’s performance and take corrective actions if necessary

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