What Is Planned Value in Project Management?

Planned Value (PV) is a metric in project management. It represents the budgeted cost of work scheduled to be completed by a specific point in time. This metric provides a financial baseline for evaluating project performance, establishing the project’s financial progress according to the initial plan.

Understanding Planned Value

Planned Value quantifies the financial worth of work that should have been accomplished according to the project’s approved schedule and budget. Derived from the project’s baseline plan, it outlines the expected cumulative cost of tasks over the project lifecycle. PV is not about actual money spent or physical work completed; instead, it reflects the anticipated cost of scheduled work.

For instance, if a project is budgeted for $100,000 and is expected to be 25% complete by the end of the first month, the Planned Value at that point would be $25,000. This provides a benchmark for project managers to compare future actual performance against the established expectation.

Calculating Planned Value

Planned Value is calculated using the project’s total budget and the planned percentage of work completion at a given time. The formula for Planned Value (PV) is: PV = Budget at Completion (BAC) × Planned Percentage Complete. Budget at Completion (BAC) represents the total approved budget for the entire project. The planned percentage complete refers to the proportion of the project that should be finished by the analysis date, as outlined in the project schedule.

For example, consider a project with a total budget (BAC) of $150,000, planned to last 15 months. If, after three months, the schedule indicates that 20% of the work should be completed, the Planned Value would be calculated as: PV = $150,000 × 20% = $30,000. This means that, according to the plan, $30,000 worth of work should have been completed by that three-month mark. This calculation helps evaluate if the project is progressing as intended against its financial and schedule targets.

Applying Planned Value

Planned Value is a component within Earned Value Management (EVM), a widely used project performance methodology. EVM uses PV in conjunction with other metrics, such as Earned Value (EV) and Actual Cost (AC), to assess a project’s financial and schedule health. Comparing these values helps project managers gain insights into performance.

One application of PV is in calculating Schedule Variance (SV), which measures whether a project is ahead of or behind its planned schedule. The formula for Schedule Variance is SV = Earned Value (EV) – Planned Value (PV). A positive Schedule Variance indicates the project is ahead of schedule, meaning more work has been completed than planned. Conversely, a negative Schedule Variance signifies the project is behind schedule, as less work has been accomplished than projected by the planned value.