Digital Engineering Guide
Planned Value, Earned Value and Actual Cost form the foundation of Earned Value Management. Understanding the distinction between them is more important than memorizing formulas.
Planned Value (PV)
PV answers: How much budgeted work should have been completed by now? It comes from the approved time-phased baseline. If a AED 200,000 activity is planned to be 60% complete at the status date, its planned value at that date is AED 120,000.
Earned Value (EV)
EV answers: How much budgeted value has actually been earned through completed work? If that same activity is physically only 40% complete, EV is AED 80,000. The use of budgeted value lets schedule progress be compared with cost on a common monetary scale.
Actual Cost (AC)
AC answers: What did the completed work actually cost? It should capture the costs attributable to the work performed through the status date, subject to the organization’s accounting and accrual rules.
Why they must use the same scope structure
PV, EV and AC become misleading if each number is collected at a different level or mapped to different work packages. Good coding structures, cost accounts and project mappings are therefore essential.
Common mistake
Invoice percentage is not automatically earned value. Payment milestones, material advances and billing terms can differ significantly from actual physical progress.
Frequently asked questions
Is PV the same as budget?
PV is the portion of the approved budget scheduled to be earned by a particular date; BAC is the full approved budget for the defined scope.
Is EV equal to revenue?
No. EV is a project-control metric based on budgeted work completed. Revenue recognition follows accounting and contract rules.
Can AC include committed purchase orders?
Normally AC refers to incurred actual cost. Commitments are valuable for forecasting but should be distinguished from actual cost.
Reference
Terminology follows established Earned Value Management practice as described by the Project Management Institute.
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