Earned Value Analysis in Project Management

A common project management tool, earned value analysis is often misunderstood and misused by project managers. After understanding earned value analysis, you may be able to save your company time and money. It can identify and fix potential problems early rather than later, which increases the chance of on-time and on-budget deliveries. All in all, if you're unfamiliar with how earned value analysis works, you might actually cause more trouble than you solve with it!

What is Earned Value Analysis?

An earned value analysis predicts future project performance by analyzing past performance data. To improve the chances of success, this information can be used to optimize the project management strategy. In a project, actual and earned values are different measures of progress. An actual cost is the amount spent during the course of a project, while earned value is the amount of work completed. At the point in time where both lines intersect, there is no more work left to be done for that period.

What Is it Used for?

Project managers can use earned value analysis (Earned Value Analysis) as a tool to measure progress and assess whether a project is on track. It is recommended to be used as a part of the planning performance domain, and measurement performance domain. By means of Earned Value Analysis, projects can be better managed with helpful, practical data. Creating a budget baseline and schedule baseline is the first step in using Earned Value Analysis. In order to calculate earned value, they track actual costs and compare them with the baseline. With the analysis of this data, a project manager is able to identify flaws in the project and make necessary adjustments to keep it on course. The following are some examples of what can be learned from Earned Value Analysis: 

  • It is time to take corrective action when project budgets are not met; 
  • There may be a need to reallocate funds or reassign resources;  

You might consider adding resources if schedule variances are greater than budget variances; if cost variances are greater than those for the baseline plan, your team may require additional funding. But if there are any gaps in work done vs. work scheduled or budgeted, then you'll need to make a priority shift. 

See also: Variance Analysis

Regression Analysis

Reserve Analysis

MultiCriteria Decision Analysis

Monte Carlo Analysis

Sensitivity Analysis

What-if Scenario Analysis