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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.

MCW
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Avishka Dambawinna
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    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. – David Espina Nov 03 '21 at 12:32
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    @DavidEspina well I did both ways, I think now it's clear – Avishka Dambawinna Nov 03 '21 at 13:41

2 Answers2

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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.

MCW
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    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. – David Espina Dec 03 '21 at 14:25
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    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 03 '21 at 14:48
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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.

David Espina
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