# Getting correct value of Planned value for Earned Value Management calculations

I'm learning about project management and currently having confusion about getting Planned Value(PV) in Earned Value Management calculations. Here's the question,

You are a Project Manager for LAK Super, a supermarket chain, and are currently working on a project to build a new outlet. The planned value (PV) for the foundation and the frame is \$500,000, After five months, you do a performance measurement analysis, You are currently not ahead of schedule. The actual costs for the foundation and frame were \$650,000 up to this point where only 80% of the work is complete.

I tried to calculate the SPI(Schedule Performance Index) and CPI(Cost Performance Index) of the scenario considering 80% of the project as the planned value.

``````So planned value(PV) = \$500, 000 * 80/100 = \$ 400,000
project is not ahead so, SPI <= 1
Actual cost(AC) = \$ 650,000
SPI = Earned Value(EV) / Planned Value

so,
EV/PV <= 1
EV/400,000 <= 1
Considering best case scenario(on schedule),
Ev = \$400,000

so,
cost variance(CV) = EV - PV
= - \$ 250,000
CPI = EV/AC = 8/13 (Over budget)
SPI = EV/PV = 1 (on schedule)
``````

It seems the calculations returns the correct answer but I'm not sure what I did is correct or wrong. Is the PV \$500,000 or \$400,000. Any guidance is greatly appreciated.

• Your recalculation of PV is incorrect. PV is given to you at \$500,000. The 80% complete is against BAC, which is unknown. You HAVE to make an assumption to arrive at the BAC. BAC is = to PV only at the end of the project, at 100% complete. Nov 3, 2021 at 12:32
• @DavidEspina well I did both ways, I think now it's clear Nov 3, 2021 at 13:41

You are a Project Manager for LAK Super, a supermarket chain, and are currently working on a project to build a new outlet. The planned value (PV) for the foundation and the frame is \$500,000, After five months, you do a performance measurement analysis, You are currently not ahead of schedule. The actual costs for the foundation and frame were \$650,000 up to this point where only 80% of the work is complete.

I think I agree with David Espina for the first half of his answer. My read is "The planned value (PV) for the foundation and the frame is \$500,000" The answer to your question "What is planned value?" is \$500K.

I read the earned value slightly differently. I read "only 80% of the work is complete" to suggest that work is 20% behind the schedule. Costs are 150K over the plan and earned value is 20% below the plan.

Good luck.

• Yeah, I can see your interpretation. Does "work" equal what should have been done to that date (which is PV) or does it equal 80% of the total work (which is BAC). Completely unknown in the OP. I interpreted it based on BAC. Dec 3, 2021 at 14:25
• Precisely - I'm trying to avoid criticizing the question. Won't be a problem in the real world, because the PM (should have) established these definitions. But for an exercise, I wanted to provide an alternative interpretation, because looking at alternatives might help to generate and cull potential solutions.
– MCW
Dec 3, 2021 at 14:48

The problem indicates that the PV = \$500,000 and you are not ahead of schedule. The safest assumption is that you are on schedule and that EV = \$500,000. If you assume that you are behind schedule, then EV can equal anything between \$1 and \$499,999. The problem becomes unsolvable if the question requires discrete CPI and CV values.

So, if PV = \$500,000, then BAC = \$625,000 (\$500,000/80%). AC = \$650,000 so CPI = 0.77 and CV = (\$150,000). EAC = \$812,500 (BAC/EV) and VAC = (\$187,500).

This would be my solution to the problem. I am not sure if my answer would be considered correct but I don't see any other solution.