Planned Value (PV)

5 minutes 5 Questions

Planned Value (PV) is a fundamental concept in Earned Value Management (EVM) that represents the authorized budget assigned to scheduled work to be accomplished at a given point in time. It reflects the planned amount of work that should have been completed according to the project schedule and cost estimates. PV is calculated before the project execution begins and is used as a baseline to measure project performance and progress. By comparing PV with other EVM metrics like Earned Value (EV) and Actual Cost (AC), project managers can assess whether the project is on track concerning scope, schedule, and budget. PV is critical in project planning as it establishes the time-phased budget for the project tasks and deliverables. It is the cumulative cost of the work scheduled to be performed up to a specific point in the project timeline. In essence, it answers the question: "How much work should have been completed by now, according to the plan?" Calculating PV involves distributing the total project budget over the project's timeline based on the scheduled work. This involves creating a detailed project schedule and allocating costs to each task or work package. The cumulative PV is then plotted over time, forming the Performance Measurement Baseline (PMB), which serves as a reference for measuring actual project performance. Understanding PV is crucial for project managers because it provides the basis for variance analysis. Comparing PV with EV allows for the calculation of Schedule Variance (SV), indicating whether the project is ahead or behind schedule in terms of value earned. Similarly, comparing PV with AC can provide insights into cost performance when used in conjunction with other EVM metrics. In summary, Planned Value is an essential component of EVM that helps project managers plan, monitor, and control project performance. It sets the stage for effective performance measurement by providing a planned baseline against which actual progress and costs can be compared, enabling informed decision-making and proactive management of project scope, schedule, and budget.

Guide to Planned Value (PV) in Earned Value Management

What is Planned Value (PV)?

Planned Value (PV) is a fundamental component of Earned Value Management (EVM). It represents the authorized budget assigned to scheduled work. In simpler terms, PV is what you planned to spend on the work you scheduled to complete by a specific point in time.

PV is sometimes referred to as the Budgeted Cost of Work Scheduled (BCWS) in older EVM terminology.

Why is Planned Value Important?

PV serves as the baseline against which project performance is measured. It's crucial because it:

- Provides a time-phased budget baseline
- Helps in measuring schedule and cost variances
- Enables forecasting of project outcomes
- Facilitates early detection of potential issues
- Supports data-driven decision making

How Planned Value Works

PV is calculated by taking the approved budget for an activity and spreading it across the planned duration according to the schedule. The calculation is:

PV = BAC × % of planned work

Where BAC (Budget At Completion) is the total approved budget for the project or activity.

For example, if a project has a BAC of $100,000 and 25% of the work was planned to be complete by today, the PV would be $25,000.

Key Concepts Related to PV:

1. Cumulative PV - The sum of all PV up to a specific point in time
2. PV curve - Graphical representation of planned expenditure over time
3. Time-phased budget baseline - The distribution of the budget across the project timeline
4. Performance measurement baseline - The approved plan against which project execution is compared

Exam Tips: Answering Questions on Planned Value (PV)

1. Understand the formula: Know that PV = BAC × % of planned work. Be prepared to calculate PV given different variables.

2. Distinguish from other EVM metrics: Don't confuse PV with Earned Value (EV) or Actual Cost (AC). PV is what was planned to be accomplished, EV is what was actually accomplished, and AC is what was actually spent.

3. Remember time relation: PV is always tied to the original schedule. If asked about PV at a specific date, refer to what was planned for that date in the baseline.

4. Focus on schedule variance: Know that Schedule Variance (SV) = EV - PV. A negative SV indicates the project is behind schedule.

5. Understand schedule performance index: Be familiar with SPI = EV/PV. An SPI less than 1.0 indicates schedule slippage.

6. Recognize cumulative values: Exam questions often deal with cumulative PV rather than period PV. Be clear on which is being asked.

7. Apply to scenarios: Practice applying PV calculations to different project scenarios to build confidence.

8. Relate to project documentation: Understand that PV comes from the approved project management plan and performance measurement baseline.

9. Recognize that PV changes: PV can change if the project baseline is revised and approved.

10. Connect to project phases: Be able to analyze PV in different project phases and explain what it means for project performance.

By mastering the concept of Planned Value, you'll have a solid foundation for understanding Earned Value Management and answering related exam questions confidently.

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