Define Planned Value, Actual Cost and Earned Value?

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Planned Value is the value of the project that has been estimated and approved before the project starts. Actual Cost is the total cost or the amount of money spent during the project. Earned Value is the value earned in the completion of the project. These three elements together form Earned Value Management (EVM).

In project management, Planned Value (PV), Actual Cost (AC), and Earned Value (EV) are three key metrics used to assess and monitor project performance. Here’s a brief definition of each:

  1. Planned Value (PV): Planned Value represents the authorized budget assigned to scheduled work to be accomplished for an activity or a work breakdown structure component. It is also known as Budgeted Cost of Work Scheduled (BCWS). PV is typically established at the beginning of the project during the planning phase and represents the baseline against which actual performance is measured over time. PV helps in assessing whether the project is progressing as planned in terms of cost and schedule.
  2. Actual Cost (AC): Actual Cost represents the total costs actually incurred and recorded in accomplishing work performed during a given time period. It is also known as Actual Cost of Work Performed (ACWP). AC includes all direct and indirect costs associated with the project, such as labor, materials, equipment, overhead, and any other expenses directly related to the project execution. AC provides insights into how much money has been spent on the project up to the current point in time.
  3. Earned Value (EV): Earned Value represents the value of the work actually accomplished or completed at a specific point in time. It is also known as Budgeted Cost of Work Performed (BCWP). EV is measured based on the progress made against the planned activities or deliverables as outlined in the project schedule. It helps in assessing the value generated by the project team relative to the planned budget and schedule. EV allows project managers to evaluate performance efficiency and determine if the project is ahead of or behind schedule and budget.

In summary:

  • Planned Value (PV) is the authorized budget assigned to scheduled work.
  • Actual Cost (AC) is the total costs actually incurred for work performed.
  • Earned Value (EV) is the value of the work actually accomplished.

During an interview, you can provide these definitions and perhaps offer examples or scenarios to illustrate how each metric is calculated and utilized in project management. Additionally, you can discuss how these metrics are often used together to calculate key performance indicators such as Schedule Performance Index (SPI) and Cost Performance Index (CPI) to further assess project health and performance.