Imagine slicing through your project’s complexity with surgical precision. Planned Value (PV) is that scalpel in project management: a critical metric forecasting the work scheduled and the budget allocated for that work by a specific time.
Harnessing PV not only positions you to steer projects with confidence but also empowers you to pinpoint financial health with the acumen of a seasoned CFO.
This article unravels the crux of PV and how it integrates into the larger tapestry of Earned Value Management (EVM). You’ll journey through concepts like Cost Baseline and explore tools crucial for financial planning in projects.
By the final punctuation mark, you’ll not just grasp what is PV in project management but wield the knowledge to optimize your project’s financial trajectory.
Expect to navigate through the practical applications of Performance Measurement Baseline (PMB), gain insights on balancing the Budget at Completion (BAC), and become fluent in the language of Project Cost Estimation.
Delve into this deep dive, and emerge with strategic prowess over your projects’ fiscal pulse.
Definitions and Relevant Metrics
To complete a task, you first need to reserve a portion of your budget for it. Next, you need to understand what is PV in project management. To compare it to the Planned Value metric, review that task’s place and estimated cost on the initial timeline. So, PV refers to the total budget assigned for completing a specific task.
As such, PV is the starting reference point that project managers use to craft a project schedule. Afterward, they add the Earned Value EV and actual cost metrics. Combining them gives you a thorough look at the work performed thus far.
Aside from that, PV plays a hand in discovering the Budget at Completion value. Hence, managers include the PV rating before the project begins. Thus, the Budgeted Cost of Work Scheduled is another name for it.
Background and Starting Frameworks
The Earned Value Management System is the frame for measuring progress. You can use it for the correct evaluation of the completed work and data analysis. Generally, you’ll need to add values like cost and scope baseline when inspecting a given point in time. Together, they comprise much of what is PV in project management.
This will allow you to gauge the three essential aspects:
- The Planned Value
- The Earned Value
- The Actual Cost metrics
The Budget at Completion value rounds up this system. That is the final input of the EVMS method. However, calculating the BAC is easier than the other three. Thus, it refers to the total project budget.
Take the “to build a home” analogy. To create a comfortable home for you, you’ll need to envision the final look. Also, you’ll need to set proper foundations and invest in the building’s exterior. Hence, you’ll need to schedule which resources to spend and for what.
However, many roadblocks can cause you to lose time. To notice them, you’ll need to compare your current progress with the estimated optimal pace. This same scheme applies to project management also. To gauge your progress there, use the PV and AC values.
The Importance of EV
Unlike Planned Value, Earned Value highlights the actual results achieved at a given moment. As such, it cannot surpass the initial PV figure. So, when reviewing your planned budget, consider the current EV metric to get the right idea.
In other words, EV distills your progress in percentages in relation to the project’s schedule. Then, you can compare it to the criteria set for the next WBS component. Use this approach to calculate EV: EV= % of the completed work x BAC.
The Actual Cost Metric
This refers to the total sum you’ve spent to achieve your current progress. So, it’s about how much funds you have to funnel to stay on the critical path. Thus, another name for this is the Actual Cost of Work Performed.
As a result, calculating the AC is a simple mathematical operation. You won’t need any formulas to deduce that sum.
The Basic Mathematical Operations
The project’s scheduled performance index and budget pinpoint the PV value. This is the total value of the project’s final outcome or list of deliverables. To build up that formula, managers use the Work Breakdown Structure approach. Those results reveal what is PV in project management for each particular case.
That’s the starting point when summarizing project duration. Every WBS aspect covers a percentage of the total work roadmap. At the same time, the project manager will note the optimal delivery time for that activity.
Fulfilling each task by following that principle should lead to project completion. That way, we can group one chain into a milestone, which will further simplify tracking. Next, we can accurately postulate which deliverable can be sent ahead of schedule.
As for calculating the PV, you can use this formula: completed %X the task’s budget. Depending on your situation, add the proper currency and measure units. However, note that the whole team must follow once you pick a monetary value.
Otherwise, the reports will turn incoherent, and you’ll have to spend time rethreading your steps. The same goes if you don’t use monetary values at all. The Cost Variance is the key pain point in such scenarios. Figuring out how off-track budget-wise you are will also be a hassle.
For example, you should divide the total budget of $500,000 into several milestones. Next, your WBS values might show a 20% completion goal for a given date. That means the PV for that part of the project’s schedule will be $100,000.
If you continue adding milestones, you’ll produce the entire roadmap. The line will begin at the 0 mark during the first day. The final date will fit with the 100 mark later on. That is the total cost or total budget for the project.
However, the line will not be straight at all times. Instead, it will curl depending on the value of the completed tasks at certain points. Thus, you’ll be able to track the progress via that chart.
Granted, that value will be trickier to summarize for some projects. It depends on the type of work and how much value each task brings. So, the project manager will have to deduce the completion percentage by using all metrics.
Benefits and Applicable Know-How
Keeping an eye on the Planned Value will allow you to switch gears when needed. Schedule variance is the practice of changing the pace of a workflow. To identify when it’s time to do so, compare the initial outline and the current achievements. So, review the PV and EV values after clearing a milestone.
Cost variance issues also happen when resource costs exceed labor costs. Hence, delays may happen that will push back the completion date. At the same time, they will affect the BAC rating, too.
Following those calculations lead to the Schedule Performance Index. Then, use both schedule and cost variance to simplify even the most complex charts. That will allow you to diligently oversee a project.
FAQ On What Is PV In Project Management
What Exactly is Planned Value in Project Management?
Planned Value (PV) is a projection of the budget. It’s tied to scheduled work by a set date. Think of it like a financial waypoint, marking where we expect our project’s expenses to be at a certain point in time. Spot-on for budget tracking.
How Does Planned Value Impact Project Budgeting?
PV is the financial heartbeat of project budgeting. It helps forecast if we’ll hit the budget targets. By comparing PV against Actual Cost (AC) and Earned Value (EV), it becomes clear if we’re overspending or if expenses are aligned with the plan.
Why is Planned Value Important for Project Cost Management?
PV’s importance cuts deep in cost management. It creates a baseline—connecting dots between what’s being spent and the work being done. Managers use PV to check if money is being burned at the right pace. No PV? Flying blind, budget-wise.
In What Ways Can Planned Value Affect Project Scope?
PV affects project scope by providing a monetary lens to view scheduled work. It’s a reality check. If PV veers off from the plan, we might need to adjust the scope to keep the budget from going rogue. It keeps things under a financial microscope.
How Can I Calculate Planned Value?
To calculate Planned Value, we grab the project’s Cost Baseline and multiply it by the percentage of work planned to be completed by a certain date. Math magic! It’s not quantum physics, just a straightforward way to foresee spending.
What is the Difference Between Planned Value and Earned Value?
PV is your plan; Earned Value (EV) is reality kicked into gear. PV shows the budget for work intended to be done by now, while EV reveals the budget for what’s actually accomplished. They’re besties in analysis, comparing what you hoped for versus what you nailed.
How Does Planned Value Relate to Earned Value Management (EVM)?
PV is a cornerstone in EVM. It’s like being part of a financial Avengers team—it stands with EV and AC to form EVM, giving us the superpowers of foresight and insight into a project’s fiscal state. Together, they conquer budget chaos.
When Should I Review Planned Value?
Review Planned Value often—like your favorite social media feed. Each project management checkpoint is a golden opportunity. Eyeballing PV regularly keeps you on top of the budget’s pulse and ahead of the game, financially speaking.
Can Planned Value Differ Across Project Stages?
Absolutely. PV can—and often does—change depending on the stage. Early stages might see conservative numbers, but as the project takes shape, those PV figures will morph to reflect the evolving cost forecast and Work Breakdown Structure (WBS) details.
What Happens If Planned Value is Consistently Lower Than Actual Cost?
Alarm bells should ring! If PV is always under AC, that’s code for ‘we’re overspending’. This mismatch demands a deep dive into Cost Control Techniques and a hard look at where the cash is flowing. Time to tighten the reins and realign the budget.
So we’ve journeyed deep into the crux of what is PV in project management. It’s the bread crumbs we scatter on the path of our project, leading us back to the fiscal sanity of meeting our budget goals.
- Think of it: enlightening insights wrapped up in three little letters—P.V.
- Imagine the power it gives you to steer the project’s financial ship like a skilled captain.
If we stay true to PV by keeping it aligned with our projects’ work breakdown structure, and cost baseline, the budget won’t spiral into chaos. It’s like having a treasure map, one that leads you to successful project delivery, without the dreaded budget blowout.
Flip the final page of this guide, and you’re equipped. Not only to answer the pressing question of what is pv in project management but also to apply its principles, ensuring every dollar in your project sings in tune with your plans. Here’s to projects planned, budgets balanced, and financial forecasting finesse.
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