- Blog Categories
- Project Management
- Agile Management
- IT Service Management
- Cloud Computing
- Business Management
- Business Intelligence
- Quality Engineer
- Cyber Security
- Career
- Big Data
- Programming
- Most Popular Blogs
- PMP Exam Schedule for 2024: Check PMP Exam Date
- Top 60+ PMP Exam Questions and Answers for 2024
- PMP Cheat Sheet and PMP Formulas To Use in 2024
- What is PMP Process? A Complete List of 49 Processes of PMP
- Top 15+ Project Management Case Studies with Examples 2024
- Top Picks by Authors
- Top 170 Project Management Research Topics
- What is Effective Communication: Definition
- How to Create a Project Plan in Excel in 2024?
- PMP Certification Exam Eligibility in 2024 [A Complete Checklist]
- PMP Certification Fees - All Aspects of PMP Certification Fee
- Most Popular Blogs
- CSM vs PSM: Which Certification to Choose in 2024?
- How Much Does Scrum Master Certification Cost in 2024?
- CSPO vs PSPO Certification: What to Choose in 2024?
- 8 Best Scrum Master Certifications to Pursue in 2024
- Safe Agilist Exam: A Complete Study Guide 2024
- Top Picks by Authors
- SAFe vs Agile: Difference Between Scaled Agile and Agile
- Top 21 Scrum Best Practices for Efficient Agile Workflow
- 30 User Story Examples and Templates to Use in 2024
- State of Agile: Things You Need to Know
- Top 24 Career Benefits of a Certifed Scrum Master
- Most Popular Blogs
- ITIL Certification Cost in 2024 [Exam Fee & Other Expenses]
- Top 17 Required Skills for System Administrator in 2024
- How Effective Is Itil Certification for a Job Switch?
- IT Service Management (ITSM) Role and Responsibilities
- Top 25 Service Based Companies in India in 2024
- Top Picks by Authors
- What is Escalation Matrix & How Does It Work? [Types, Process]
- ITIL Service Operation: Phases, Functions, Best Practices
- 10 Best Facility Management Software in 2024
- What is Service Request Management in ITIL? Example, Steps, Tips
- An Introduction To ITIL® Exam
- Most Popular Blogs
- A Complete AWS Cheat Sheet: Important Topics Covered
- Top AWS Solution Architect Projects in 2024
- 15 Best Azure Certifications 2024: Which one to Choose?
- Top 22 Cloud Computing Project Ideas in 2024 [Source Code]
- How to Become an Azure Data Engineer? 2024 Roadmap
- Top Picks by Authors
- Top 40 IoT Project Ideas and Topics in 2024 [Source Code]
- The Future of AWS: Top Trends & Predictions in 2024
- AWS Solutions Architect vs AWS Developer [Key Differences]
- Top 20 Azure Data Engineering Projects in 2024 [Source Code]
- 25 Best Cloud Computing Tools in 2024
- Most Popular Blogs
- Company Analysis Report: Examples, Templates, Components
- 400 Trending Business Management Research Topics
- Business Analysis Body of Knowledge (BABOK): Guide
- ECBA Certification: Is it Worth it?
- How to Become Business Analyst in 2024? Step-by-Step
- Top Picks by Authors
- Top 20 Business Analytics Project in 2024 [With Source Code]
- ECBA Certification Cost Across Countries
- Top 9 Free Business Requirements Document (BRD) Templates
- Business Analyst Job Description in 2024 [Key Responsibility]
- Business Analysis Framework: Elements, Process, Techniques
- Most Popular Blogs
- Best Career options after BA [2024]
- Top Career Options after BCom to Know in 2024
- Top 10 Power Bi Books of 2024 [Beginners to Experienced]
- Power BI Skills in Demand: How to Stand Out in the Job Market
- Top 15 Power BI Project Ideas
- Top Picks by Authors
- 10 Limitations of Power BI: You Must Know in 2024
- Top 45 Career Options After BBA in 2024 [With Salary]
- Top Power BI Dashboard Templates of 2024
- What is Power BI Used For - Practical Applications Of Power BI
- SSRS Vs Power BI - What are the Key Differences?
- Most Popular Blogs
- Data Collection Plan For Six Sigma: How to Create One?
- Quality Engineer Resume for 2024 [Examples + Tips]
- 20 Best Quality Management Certifications That Pay Well in 2024
- Six Sigma in Operations Management [A Brief Introduction]
- Top Picks by Authors
- Six Sigma Green Belt vs PMP: What's the Difference
- Quality Management: Definition, Importance, Components
- Adding Green Belt Certifications to Your Resume
- Six Sigma Green Belt in Healthcare: Concepts, Benefits and Examples
- Most Popular Blogs
- Latest CISSP Exam Dumps of 2024 [Free CISSP Dumps]
- CISSP vs Security+ Certifications: Which is Best in 2024?
- Best CISSP Study Guides for 2024 + CISSP Study Plan
- How to Become an Ethical Hacker in 2024?
- Top Picks by Authors
- CISSP vs Master's Degree: Which One to Choose in 2024?
- CISSP Endorsement Process: Requirements & Example
- OSCP vs CISSP | Top Cybersecurity Certifications
- How to Pass the CISSP Exam on Your 1st Attempt in 2024?
- Most Popular Blogs
- Best Career options after BA [2024]
- Top Picks by Authors
- Top Career Options & Courses After 12th Commerce in 2024
- Recommended Blogs
- 30 Best Answers for Your 'Reason for Job Change' in 2024
- Recommended Blogs
- Time Management Skills: How it Affects your Career
- Most Popular Blogs
- Top 28 Big Data Companies to Know in 2024
- Top Picks by Authors
- Top Big Data Tools You Need to Know in 2024
- Most Popular Blogs
- Web Development Using PHP And MySQL
- Top Picks by Authors
- Top 30 Software Engineering Projects in 2024 [Source Code]
- More
- Tutorials
- Practise Tests
- Interview Questions
- Free Courses
- Agile & PMP Practice Tests
- Agile Testing
- Agile Scrum Practice Exam
- CAPM Practice Test
- PRINCE2 Foundation Exam
- PMP Practice Exam
- Cloud Related Practice Test
- Azure Infrastructure Solutions
- AWS Solutions Architect
- AWS Developer Associate
- IT Related Pratice Test
- ITIL Practice Test
- Devops Practice Test
- TOGAF® Practice Test
- Other Practice Test
- Oracle Primavera P6 V8
- MS Project Practice Test
- Project Management & Agile
- Project Management Interview Questions
- Release Train Engineer Interview Questions
- Agile Coach Interview Questions
- Scrum Interview Questions
- IT Project Manager Interview Questions
- Cloud & Data
- Azure Databricks Interview Questions
- AWS architect Interview Questions
- Cloud Computing Interview Questions
- AWS Interview Questions
- Kubernetes Interview Questions
- Web Development
- CSS3 Free Course with Certificates
- Basics of Spring Core and MVC
- Javascript Free Course with Certificate
- React Free Course with Certificate
- Node JS Free Certification Course
- Data Science
- Python Machine Learning Course
- Python for Data Science Free Course
- NLP Free Course with Certificate
- Data Analysis Using SQL
- Home
- Blog
- Project Management
- What is Planned Value (PV)? Formula, Example, Benefits
What is Planned Value (PV)? Formula, Example, Benefits
Updated on Mar 19, 2024 | 4 min read | 2.1k views
Share:
Table of Contents
- What is the Planned Value in Project Management?
- Planned Value (PV) Formula
- Why is Planned Value Important in Project Management?
- How Does Planned Value Affect Project Development?
- How to Calculate Planned Value (PV)?
- A real-world example of planned value
- Benefits of planned value for project analysis
- Limitations of Planned Value
- Planned value vs. earned value
- Conclusion
In project management, keeping track of how your project is progressing can be a nightmare. But don’t worry; Planned Value offers a solution to alleviate this concern. According to the Project Management Body of Knowledge by PMI, planned Value is a fundamental concept in project management.
In this blog, we’ll break down Planned Value for your better understanding. I will provide details about its calculation, offer real-life examples, and explore why it holds significant value for project managers. Let’s begin!
What is the Planned Value in Project Management?
Planned Value in project management represents the authorized budget assigned to the work scheduled to be completed up to a certain point in time. It serves as a baseline against which actual project performance is measured, as well as the planned progress of the project at a specific stage, and helps project managers assess whether the project is on track in terms of schedule and budget. You can learn more about Project Management training online
Planned Value (PV) Formula
To calculate Planned Value, the following formula is used:
Planned Value (PV)=Planned % Complete × Total Budget
The Planned Value formula multiplies the percentage of planned completion of the project by the total budget allocated for the project. It provides a quantitative measure of the budgeted cost of work scheduled to be completed at a specific point in time during the project.
PMBOK covers this calculation in detail; you can learn more from the Project Management Professional training course
Why is Planned Value Important in Project Management?
According to the PMBOK, Planned Value in project management is essential for the following reasons:
- Performance Baseline: PV serves as a baseline against which actual project performance is measured. It provides a standard against which project progress can be evaluated.
- Objective Measurement: PV offers an objective measurement of the planned progress of the project. It quantifies the budgeted cost of work scheduled to be completed, aiding in assessing project performance.
- Early Warning System: By comparing PV with actual performance metrics such as Earned Value (EV) and Actual Cost (AC), project managers can identify variances early, allowing for timely corrective actions to keep the project on track.
- Decision Support: PV provides project managers with valuable information for decision-making. It assists in determining the effectiveness of project strategies, resource allocation, and scheduling adjustments.
- Stakeholder Communication: PV serves as a common metric for communicating project progress to stakeholders. It helps in clear and consistent communication about project status, forecasts, and potential risks.
Representation below may help to understand the concept better
How Does Planned Value Affect Project Development?
Planned Value plays a significant role in planning the project in several ways:
- Setting Performance Baseline: PV establishes a performance baseline by representing the planned value of work scheduled to be completed at various project stages. This baseline serves as a reference point for measuring actual project performance and progress.
- Guiding Resource Allocation: PV provides project managers with insights into the planned distribution of resources across different project activities. By comparing PV with actual performance, Project managers can identify areas where resource allocation may need adjustment to ensure project objectives are met.
- Supporting Decision-Making: PV assists project managers in making informed decisions throughout the project lifecycle. By analyzing PV alongside actual performance metrics such as Earned Value (EV) and Actual Cost (AC), managers can identify variances and adjust project strategies, schedules, and resource allocations.
- Driving Accountability: PV helps drive accountability among project team members by establishing clear expectations for planned work completion. Team members are aware of their responsibilities and deadlines, which fosters a sense of ownership and ensures alignment with project objectives.
How to Calculate Planned Value (PV)?
To calculate Planned Value, you can use the following formula:
Planned Value = Planned % Complete × Total Budget
For example, if you have planned to complete 50% of the project’s work with a total budget of $100,000, the Planned Value would be:
PV= 50% × $100,000 = $50,000
So, the Planned Value for the project at that specific stage would be $50,000.
A real-world example of planned value
Example 1
Let’s consider a construction project to build a new office building. The project has a total budget of $1,000,000 and is scheduled to be completed in six months. After two months, the project team planned to have completed 30% of the work according to the project schedule.
Using this information, we can calculate the Planned Value as follows:
PV = 30%×$1,000,000 = $300,000
Therefore, after two months, the Planned Value for the project would be $300,000. According to the project schedule, the planned value of completed work at that stage should be $300,000.
Example 2
Let’s consider a software development project to create a new mobile application. The project has a total budget of $50,000 and is expected to be completed in four months. After one month, the project team planned to have completed 20% of the work according to the project schedule.
Using this information, we can calculate the Planned Value as follows:
PV= 20%×$50,000 = $10,000
Therefore, after one month, the Planned Value for the project would be $10,000. According to the project schedule, the planned value of completed work at that stage should be $10,000.
Benefits of planned value for project analysis
There are several benefits, but to mention a few below are the benefits I have experienced:
- Performance Measurement: PV serves as a benchmark for measuring project performance. By comparing actual progress with the planned value, project managers can assess whether the project is on track, ahead, or behind schedule.
- Variance Analysis: PV facilitates variance analysis by providing a reference point for evaluating deviations in project performance. Variances between PV and actual performance (e.g., Earned Value) highlight areas where the project is not meeting planned expectations, allowing corrective actions to be taken.
- Forecasting: PV enables forecasting future project performance based on planned work completion. Project managers can anticipate project outcomes and adjust strategies to achieve desired results. by extrapolating the planned value
- Resource Allocation: PV assists in optimizing resource allocation by providing insights into planned resource usage across different project activities. By aligning resource allocation with planned values, project managers can ensure efficient utilization of resources to meet project objectives.
- Decision Making: PV supports informed decision-making by providing a quantitative basis for evaluating project progress and performance. Project managers can use PV data to prioritize activities, allocate resources effectively, and adjust project plans as needed.
- Risk Management: PV aids in risk management by identifying potential risks early in the project lifecycle. By monitoring deviations between PV and actual performance, project managers can identify risks impacting project outcomes and develop mitigation strategies to address them.
Limitations of Planned Value
While Planned Value offers several benefits for project analysis, it also has some limitations:
- Assumes Static Conditions: PV is based on the initial project plan and assumes that project conditions will remain constant throughout the project lifecycle. Project parameters such as scope, schedule, and budget may change, rendering the planned value less accurate over time.
- Does Not Consider Actual Performance: PV does not consider actual performance or progress achieved on the project. Therefore, it may not accurately reflect the current state of the project or account for deviations from the planned schedule or budget.
- Limited Predictive Power: PV alone may not provide sufficient information for predicting future project outcomes. While it can forecast planned progress based on the initial project plan, it does not account for unforeseen events or changes in project conditions that may impact project performance.
- Dependent on Initial Estimates: PV relies on initial estimates of work completion and budget allocation. If these estimates are inaccurate or overly optimistic, the planned value may not reflect the true scope or complexity of the project, leading to discrepancies in performance measurement.
- Lack of Flexibility: PV does not easily accommodate project plan or scope changes. As project conditions evolve, adjustments to the planned value may be necessary to reflect updated objectives or priorities.
- May Encourage Micromanagement: Overemphasis on PV as a performance metric may encourage micromanagement and a focus on meeting planned targets at the expense of broader project goals or stakeholder needs. More about the effects of planned value can be learned on KnowledgeHut’s Project Management training online
Planned value vs. earned value
Aspect | Planned Value (PV) | Earned Value (EV) |
Definition | The authorized budget allocated to work scheduled to be completed up to a specific point in time. | The value of the work performed and completed up to a specific point. |
Purpose | Provides a baseline for planned project performance. | Measures actual project performance against the planned baseline. |
Calculation | Planned % Complete X Total Budget | Actual % Complete X Total Budget |
Representation | Planned progress at a specific point in time according to the project schedule. | Actual progress is achieved at a specific point in time.Actual progress achieved at a specific point in time. |
Focus | Forward-looking | Backward-looking |
Timing | Planned before the work is executed. | Evaluated after the work is completed. |
Analysis | Helps in assessing if the project is on track according to the planned schedule and budget. | Helps in evaluating if the project is achieving its objectives and delivering value as planned. |
Variances | Schedule variance (SV) and Cost variance (CV) can be calculated using PV. | Schedule performance index (SPI) and Cost performance index (CPI) are calculated using EV. |
Conclusion
Planned Value is a very important concept in project management, offering a crucial framework for measuring and assessing project progress. It also enables us to gauge whether the project is on track according to the planned schedule and budget. By utilizing PV, project managers can identify variances, forecast future performance, allocate resources effectively, and make informed decisions to steer the project toward successful completion. In essence, Planned Value is a fundamental tool for project planning, monitoring, and control, contributing to the overall success of projects across various industries and domains.
Master Right Skills & Boost Your Career
Avail your free 1:1 mentorship session
Frequently Asked Questions (FAQs)
1. Is Planned Value the same as Budget at Completion?
2. What role does planned value play in project monitoring and control?
3. What factors influence the planned value of a project?
4. What challenges might project managers face when determining planned value?
5. How does planned value differ from actual cost and earned value in project management?
Get Free Consultation
By submitting, I accept the T&C and
Privacy Policy