Earned value analysis

You might think that simply comparing planned with actual would provide the right information on project performance. However, the financial performance of a project cannot be calculated using only the planned budget and the actual cost, because the planned budget does not take into account the actual progress of project tasks. It is therefore necessary to create a value that can be compared with the actual cost of the tasks. This is known as earned value.

At a given point in the project, earned value can therefore be used to determine the budget acquired, i.e. consumed in relation to the work actually carried out.

The calculations performed on the basis of earned value provide answers to the following questions:

• Is the project costing more than expected or saving less than expected?

• Is the project ahead of schedule or behind schedule?

• How much will the project cost on completion?