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Earned Value Management System (EVMS) Earned Value (EV) is a method that allows the project manager to measure the amount of work actually performed on a project against planned value. Oftentimes the term “earned value” is defined as the “budgeted cost of worked performed” or BCWP. In order to understand EV, it is worth to understand Planned Value (PV) and Actual Cost. Planned value (PV) is referred to the schedule of work that is planned to be completed at any given point of time. It is also known as “Budgeted cost of work scheduled" BCWS Whereas Actual Cost (AC) is the total of cost incurred while executing the work on material, workers and overhead. It is also referred to as “Actual Cost of Work Performed” or ACBP In most of our financial report we understand variance as the difference between Planned Cost and Actual Cost. But the problem here is, it only measure the cost difference. Business also wants to know how efficiently it is performing. In order to measure the performance of an operation, Earned Value (EV) is required. Example: If Activity A Planned Value (PV) is $70 for 2 days to complete. And Actual Cost end of Day 1 is $40. That means Planned Value in Day1, it is $35 and Day 2, it will be $35 considering 50% task completed in each day. Now if in Day 1, it has actually done 60% instead of 50%, that means it has performed better than planned. So the Earned Value will be $70 x 60% = $42 Planned Value = $35 Let us now see the Variance Anlysis: Schedule Variance (SC) = BCWP – BCWS = $42 - $35 = $7 positive Cost Variance (CV) = BCWP – ACWP = $42 - $40 = $2 positive Schedule Efficiency (SPI) = BCWP / BCWS = 42/35 = 1.2 Which means it has performed 20% above Plan Cost Performance Index (CPI) = BCWP / ACWP = 42/40 = 1.05 % Which means Efficiency is 5% above the actual cost If you want to learn more on project management, please visit us at https://tiemchart.com/ Earned Value (EV) | Earned Value Management | Earned Value in Project Management | Earned Value Management system (EVMS) | Planned Value (PV) | Budgeted Cost of Work Performed (BCWP) | Budgeted Cost of Work Scheduled (BCWS) | Actual Cost of Work Performed (ACWP) | Schedule Variance (SC) | Cost Variance (CV) | Schedule Performance Indicator (SPI) | Cost Performance Indicator (CPI) |