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Earned Value and 4c

What is Earned Value?

Earned Value is a method of comparing the budgeted hours and costs of work with the actual hours and costs, taking into account the progress on each task and the project as a whole.  It often includes the calculation of a performance indicator.

Why is it useful?

Earned Value allows you to see trends in performance, and thus to predict potential overruns.  At an individual task level, it is a good indicator of how much time and cost should have been spent so far, compared with how much time/cost has actually been spent.

However, it is advisable not to place too much reliance on such forecasts, especially in the early stages of the project's lifecycle, as few tasks have been started or completed; as time moves forward, the accuracy of the predictions increases, although you are still reliant on peoples' assessments of progress.

How does 4c work with Earned Value?

After you have estimated the project tasks, and 4c has calculated the hours and the costs (based on the resources allocated), you baseline the project.  This sets the planned hours and cost budgets for the tasks and the whole project.

When time starts being booked to the tasks, task progress is indicated by the percentage complete figure.  This may be calculated by 4c, based on the current estimated time needed to complete the task as entered on the timesheet, together with the current date; or, where a task is shared by several resources, it may be aggregated from the resources' estimates of their progress on the task.  Alternatively the task percentage complete may be estimated by the project manager and entered manually.

The budget cost is multiplied by the percentage complete figure to give the Earned Value.

planned and actual costs, Earned Value, performance

4c calculates a Performance value for hours and costs, by dividing the earned value by the actual hours and actual costs.  The Predicted Forecast is calculated by dividing the Remaining hours/costs by the performance figure, and adding the result to the the Actual hours/costs.

Graphs (s-curves) showing the cumulative planned, actual, current (forecast) and earned values can be produced.

More information on earned value:

Max's Project Management Wisdom


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