Planned Value in Project Management: Definition & Formula

Instructor: Bob Bruner

Bob is a software professional with 24 years in the industry. He has a bachelor's degree in Geology, and also has extensive experience in the Oil and Gas industry.

Planned Value is a calculation used in project management to monitor project costs compared to a baseline value. Let's look at how it is calculated and used.

Planned Value Definition

Projects often have assigned budgets. The concept of planned value can be used in planning to tie the overall project budget to the original project schedule. Because this calculation is based on the planned schedule of activities, it essentially represents the value of a project that would be considered complete, or earned, if the project were running on schedule.

Planned Value Derivation

Planned value is calculated in relation to the value of the project budget at completion, which is commonly referred to as the BAC. The BAC represents 100% of the planned budget.

The actual formula for deriving planned value is fairly simple:

Planned Value = (Planned Percent Complete) X BAC

The planned percent complete is itself a value that is derived from the activities that are captured in the project plan. This list of activities is referred to as the Work Breakdown Structure, or WBS. In the planning process, a specified amount of work is associated with each element of the WBS, and the value of each item can thus be expressed as a percentage of the total plan.

Because each element in the WBS is also tied to a planned schedule, every activity that is scheduled to be complete can be calculated at any point in time. The sum of the completed items at any point in time provides the planned percent complete number that is used in the planned value computation.

Planned Value Example

Let's say you are planning a vacation with your friends. Your plan is to drive across the country and spend time camping the first week, hang out at a beach resort the second week, and finish up by driving back home. You've given yourself 20 days to get everything done, and you've saved up $2400 in a vacation fund that you are willing to spend.

Because you only have this fixed amount you can spend, you want to monitor your spending over time to ensure that you don't run out of money before the trip is complete. You could just divide the $2400 by 20 days, and assume you can spend $120 per day. But this won't help all that much since most of your cost is going to come in the second week. Instead, you can use a more robust tool like planned value to truly understand your planned spending over your vacation schedule.

In this case your BAC is $2400, which is 100% of your planned budget. You assume you'll be driving for 6 days both ways, only spending about $75 each day, since you will be camping out and sharing traveling expenses. At the resort you've figured out that you are likely to spend $175 a day, leaving $100 extra to spend somewhere along the way.

From this you can figure out your planned value on every day of the vacation. For example, on day 8 you have spent most of your time driving and camping, and will only have planned to spend one third of your BAC. The actual planned value is:

(33%) x $2400 = $800

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