PMP Exam: Earned Value Management - Part 1, Basic Concepts

Sir Ganttalot helps you prepare for the PMP exam by explaining Earned Value Management. This is a three part lesson. Part 1 covers basic concepts, i.e. how to derive PV (Planned Value), EV (Earned Value) and AC (Actual Cost). (These terms are also known as BCWS, BCWP and ACWP respectively.) Part 2 shows how to apply these items to calculate variances (SV - Schedule Variance, CV - Cost Variance, SPI - Schedule Performance Index, CPI - Cost Performance Index). Part 3 explains how Earned Value Management is used to forecast project performance by calculating EAC - Estimate at Completion, ETC - Estimate to Complete, VAC - Variance at Completion, and TCPI - To Complete Performance Index.

[@SelfEnergetic]

The smartest and simplest video ever.Thank you, today I have a final exam and I just figured out what are these standing for.

[@alliejoan1]

Thank you, Sir! I've been looking for some quick PMP prep tools all over the web these past few weeks. Yours are--by far--the best. Simple, clear, quality controlled :-), and you have that wonderful accent so easy on the ears. I've bought the best books, taken a boot camp, and am actively studying...these videos have helped me already. So glad to be able to find something that wasn't just thrown together, where I can really trust the content!

[@theprinceofthegods]

I have an exam tomorrow on Project Management and Negotiations. And a decade later your video is still very useful and insightful.

[@CMOVlogs]

Many thanks for putting this 3 part series together!

[@lorrainebennie1893]

thanks for putting this video up Sir Ganttalot, found the terms clear and easy to understand and useful for my studies.

[@murthyvinay5]

SirGanttalot - You are the man!!!! Part 2 of this video series in three minutes taught me more about CPI and SPI than hours of other reading and review. Your EV is always first in equation and if it's a variance subtract and index divide and a schedule is a plan is genius. Thank you for posting.

[@SirGanttalot]

Thanks, I really appreciate you saying that. More importantly, if the video helped you, then I am delighted. The EV video series has been live for over 12 years. I considered updating the videos, but have left them in place because they are concise, and seem to meet people's needs. Regards.

[@jimbob9205]

Fantastically simple explanation, thank you for taking the time to share

[@JMU9402]

Thank you! You help me to understand so much better. You are an awesome teacher!

[@dushunm48]

Thank you, I teach PMP Certification and it always helps to see another perspective on teaching this subject.

[@vaishalilimaye797]

Thanks for this video. You have explained it so well and in such a simple way. Thanks again!

[@drokoton]

Thank you for sharing your experience and knowledge with us. You are doing a great job :)

[@jerrydagnon]

Thanks sir for your explanations. Clear Precise and VERY USEFUL

[@mepand]

Awesome video! Best video or anything available online that I've seen so far on the topic.

[@jpdomanski5725]

Very informative - thank you for making these and sharing

[@sunnywoo2268]

Thanks so much sir , very helpful for our final exam of PM !!!

[@createsf]

Really good job. I received my PMP in 2001, but am always looking for ways to reinforce learning. I just finished a grueling 2 week eSeminar from PMI which required usage of all of these concepts. Wished I'd had this refresher before hand!

[@SirGanttalot]

Thanks....this knowledge is definitely volatile data that's for sure! Bring in Sir Ganttalot for you next seminar. It may still be grueling but it would be entertaining as well! Best regards,

[@SirGanttalot]

Thanks very much for taking the time to comment. I really appreciate it. All the best of luck to you for your exam. It certainly sounds like you are taking a planned and structured approach to your preparation. You must be a Project Manager!

[@jsudeera07]

thanking you from bottom of the heart..

[@AnserDaad]

Great sir,In first part i have got ....thank you very much..

[@C3Nik]

Very very nice. Thanks a lot from Germany!

[@nurlanahmadli4626]

Thank you for the detailed information

[@kghmailroom8266]

Great definition of EVM, thank you

[@fsl001]

A very clear and we'll paced explanation

[@purpleredmango]

this video was great at explaing PV EV and AC. Thank you

[@ggarni2012]

Thanks Sir, you have good skills in approrching the knowledge. It's good sildes and well-organized demostration.

[@JediRomanoski]

Thank you!!!!! Very well explained!!!

[@naveennoronha]

summated clearly and consicely!

[@Sandra091964]

It does! That makes complete sense thank you!!!

[@AnfasAlfajr1]

Thank you for spreading knowledge 🙏🏻

[@justabellepeh]

thank you! this video is so useful

[@herculesandrade9192]

Excelente explicación.

[@sbolanavatu]

Thank you for the video!!

[@mahmoudhalim1320]

perfect explanation

[@usha2007]

Sir, please upload more videos on other processes and knowledge areas. I really enjoyed your videos.

[@ndapewoshali__]

Thank you for this.

[@nanamartinson3236]

Thank you!!

[@azamora2005]

nice video! THANK YOU!

[@RickyGunawan95]

Very clearly. I failed my management class once. I hope i pulled it off this time

[@aalhadheri]

thank you simple and clrear :)

[@SirGanttalot]

You have spotted something important. The total planned cost of the project, BAC, is the same thing as PV for the WHOLE project. But, PV for anything LESS than the whole project is just the PV up to that point. So at any point in your project there is always something called PV, the budgeted cost of all the work scheduled up to that point. It's just that we have a special name for the PV at the end of the project, it's called BAC. Hope that helps,

[@benjaminegas2256]

Trying to get the V4 in before the cutoff date. Thanks for the video, Sir.

[@vitomusic2012]

Thanks sir!

[@malluwawadusethikadinsara]

Thank you very much

[@stevenmoran2088]

Good, thank you.

[@SirGanttalot]

Thanks for the question. I think you are asking about EV rather than PV? If so, then EV is the value of work actually accomplished (BCWP). For activity C, 20% of the TOTAL task has been accomplished by end of day Tuesday, rather than 20% of Tuesday's work. By that point, 50% of the TOTAL task should have been done (so the PV for activity C is $100, but only 20% has acually been done so the EV is $40. I hope this helps.

[@KishoreMishra01]

Thanks for the video

[@SirGanttalot]

Thanks for the question. A couple of things to factor in to your perceptive observations. When simplifying to 4 tasks as I have done in this video, some of the formulas for forecasting (see the part 3 video in this series) don't work as as well as in larger projects. We are also behind schedule, so in the real world we would keep staff on for longer than planned, costing more. Lastly, we haven't started task D yet. Two of the earlier tasks were late and/or overbudget, so D may be as well.

[@lilicomp]

Thank you so much

[@SirGanttalot]

You are welcome....good luck with your studies.

[@ashrafelhassan4412]

Thanks a lot .. appreciated

[@stanleyliebert88]

Thanks for that videos

[@SirGanttalot]

Primavera has a strong foothold in the construction field, but many organizations are moving to MS Project. As an engineer, unless you become the main scheduler for a team, you will likely update information in schedules created for you or by others. For your direct use, you could always have MS Project on your own desktop. Your scheduler can import schedules you create into Primvera. Basic familiarity with both products would help. Basic concepts are the same, but menu commands differ.

[@sf9530]

Great videos. I am learning so much. I'm confused on the difference between EV and AC. it seems that EV and AC are basically the same. Can't EV values be accounted for in AC? Can you shed some light how to distinguish the two? Thanks for the help.

[@spearmethrough]

thank you

[@SirGanttalot]

Rebaseline means that your actual performance has drifted away significantly from the original plan, and now you are replanning all the work still to be done, and getting approval for the new plan. Once approved, the new plan becomes what you will use to tell you the new BCWS for everything going forward. ACWP of work already performed will not change. BCWP going forward will also now be measured against the new baseline. There are some additional considerations, but that's it in a nutshell.

[@piyushsinha1659]

Awesome

[@SirGanttalot]

Value Management is an overall and wide-ranging management approach which aims to create a balance between the needs and desires of project stakeholders, and the cost (resources needed) to meet those needs and wants. It is a value-based management style embracing many techniques and disciplines. Earned Value Management is a focused technique which measures and forecasts progress against the three triple constraints, Time, Cost and Scope. Hope this helps.

[@manasefs]

Sorry...$170 is right...got carried away with waelwow arguement on 'B' activity...but 'A' is $50 at 100%. and NOT $100...so you were right...appologies. I wonder which software would you recommend to learn and practice in my career as a construction engineer: Primavera or MS Project...I'm new on all of this and wonder which one shall I follow on the long run....looking forward 4 a quick reply....once again thans SIR for all ur videos...keep'em coming.

[@SirGanttalot]

AC (Actual Cost of Work Performed) is what you actually paid to get something done. EV (Budgeted Cost of Work Performed) is the ORIGINAL budget for what you got done. Let's say you are building 10 houses and budgeted $100K for EACH house. When you have built 5 houses, your EV is $500K because you have built $500K "worth" of homes against your budget. But if you had cost overruns and each house actually cost $150K, AC would be $750K so far. Hope that helps.

[@saeednemati]

Thanks

[@manasefs]

at 5:44 SIR mentioned that the EV for activty 'B' is $80....not sure how did you come up with $50 (gong back to waelwow argument)...so I agree its not 170 its 220. At any rate, the video itself, its Author, and presentation are excellent and very informative in a smooth streamline approach. Thanks.

[@GigittyGigitty]

@SirGanttalot I got ya. thx

[@SirGanttalot]

Thanks for the feedback. Click on the SirGanttalot blue name towards the top right of the page. That will take you to the Sir Ganttalot home page where there is more information about me and my company. Best regards.

[@mardionw]

Hello, I have a question about the calculation of EV. Wouldn't the calculation of EV for Activity C EV be based on $100 instead of 200 considering we have a cutoff date of Tuesday? If so, would the calculation for EV be (10% of 100) or (20% of 100)?

[@SirGanttalot]

Thanks for the question. EV is BCWP, the budgeted cost of work performed. In the example the team tells you they have performed 20% of the ENTIRE task. So the EV is the budget for that amount (20%) of the entire task. On the other hand, for PV, or BCWS, then absolutely as of the end of Tuesday, 50% of the task was scheduled to be completed. If the team had very precisely said "we have done 20% of what we were supposed to do today" then that would be like saying they had done 10% of the entire task. So in the real world, the question you ask the team and how you measure progress is significant. Hope that helps.

[@imadmaj]

Hello, Mr. SirGanttalot, based on your explanation above. If we take another approach, if activity C at end of day Tuesday is at 70% progress, then also the earned value would be 200*(70%) ?? or we would stop it at 50% then it would be 200*(50%) ??

[@konkarmilla]

this explanation was more in context of cost but i get very much confused when we talk about earned manhours. as once i had to update a excel sheet which was calculating earned manhours of a particular work performed with planned manhours

[@rajeevliyanage4716]

can u pls tell us what cost question are mostly comes to the PMP EXAM

[@GigittyGigitty]

question. if we are still looking at the work done end of day Tuesday to calc the PV shouldnt the calc be: 50+0.8(100)+(0.5*200)*(0.2) The 0.5 for activity C is to account for the fact that end of day tuesday the most we could have completed would be half of the $200 total of activity C. SO knowing that the maximum amount we could have completed is $100 we take 20% of that? Is my thinking correct here?

[@omideghtesadi4353]

Could we say that always at the end of project, assuming that all the work of the project is accomplished the EV = PV, despite the fact that we are under or above budget? So if a project is finished and SPI is not equal to one, it means the project is terminated early!

[@SirGanttalot]

If a project completes earlier than planned, then the PV up to that point, the Budgeted Cost of Work SCHEDULED, would be less that the budget for the entire project, the EV of the entire project. You would have earned the full BCWP for everything, but you had only planned to part way through at that point. If a project finishes late, then essentially the EV would equal PV.

[@Sandra091964]

What is the difference between PV and BAC? I'm very confused on that.

[@tribaldesign11]

how to rebaseline in the EVM

[@juliehill7541]

Hello Please can you help me on how to calculate and the answer to this question... Company A is working on project. The project budget is R10,000. The planned value as of data date is R4000. The project is 30% completed . 60% of the budget has been spent. If the company continues to spend money at the same rate, what will the project cost (EAC) ?

[@SirGanttalot]

You need to derive Earned Value (EV) first. EV is also known as BCWP, Budgeted Cost of Work Performed. Question tells you 30% of the project is complete, so 30% of the project is performed. Budget for the whole project is 10,000, so budget for 30% can be assumed to be 3000. So EV = 3000. Question tells you that Planned Value (PV) is 4000, and that 60% of budget has been spent. So our Actual Cost (AC) is 6000. So we can now calculate Cost Variance (CV), which is EV / AC, or 3000/6000 = 0.5. EAC in this situation would be BAC / CV. BAC is the project budget, question tells you that is 10,000. CV we just calculated as 0.5. So EAC is 10,000 / 0.5. (Be careful here, we divide by 0.5, not multiply by it.) So EAC is 20,000. This makes sense, because it tells you that the project will cost twice what was originally planned, and that matches the fact that what we have already done (30% of the project) has cost us twice as much as we expected.

[@FirasAbuSeir]

Just a small correction in your answer: you meant to say CPI = EV/AC which equals 3000/6000 = 0.5 Then EAC = BAC/CPI which equals 1000/0.5 = 20,000

[@SirGanttalot]

Thanks, but the EV calculation is correct and your own example makes one mistake. The EV of Activity A is $50, not $100 per your own calculation. So instead of your calculation for cumulative end-day 2 EV of 100+0.8 (100)+0.2(200)=220, the correct figure is 50+0.8 (100)+0.2(200)=170. Hope this helps.

[@platriani]

awesome - don't go to wikipedia - it'll eat yourbrain

[@den33775]

One thing I don't get - the PV, EV, AC calcs all make sense, but at this point, things look bad, because of the AC value of $200 against the EV of $170. But if task A is 100% complete and cost $60; task B is 80% complete and cost $110 (remaining 20% would be $27.50, making total cost of task B $137.50); and task C is 20% complete at $30 ($150 new planned value), saving us $50. So, A is $10 extra; B is 37.50 extra; C is $50 saving = 10+37.50-50 = $2.50 saving on original PV. Good news!?

[@phamgiang3158]

the video image is too poor, you need to fix it more

[@MrAlivallo]

@ 6min of the video you did not explain that you must calculate EV by multiplying project B (100 x 0.8 ) to get $80; then Project C (200 x 0.20 ) to get $40 and Project A' is %100 complete so (50 x 1.0) = $50 . then add $80 + $40 + $50 = $170

[@anaducan]

Thank you !!