Earned Value Calculation

Earned Value represents how much of a phase's (and project's) fee has actually been earned based on work completed. A project's Earned Value is the sum of the earned values of each of its phases, but the calculation for each phase differs depending on its billing format.

The Calculation, by Billing Format

• Fixed Fee phases: Percent Complete × Fee Amount. Fixed fee work isn't billed by the hour, so earned value here depends on a percent complete figure set by you or your project managers, based on their judgment of how much of the scope has actually been completed.
• Hourly phases: the total of Billing Values from related billable time slips. Since hourly work bills against actual time, earned value accrues automatically as hours are logged — no percent complete is needed.
• Hourly Not-to-Exceed (NTE) phases: the lesser of the not-to-exceed limit or the total Billing Values from related billable time slips. Earned value accrues the same way as a standard hourly phase, but is capped at the contracted not-to-exceed amount once billing values reach that limit.

Why Percent Complete Matters

Percent Complete only applies to Fixed Fee phases, and it's the one input in this calculation that isn't derived automatically from time slips — it needs to be set and kept current by you or your project managers, based on actual progress against the scope of work. Hourly and Hourly NTE phases don't need a percent complete, since their earned value is driven directly by logged time.

Because Fixed Fee earned value depends entirely on this manually set figure, an out-of-date Percent Complete will directly understate or overstate Earned Value — and everything calculated from it, including WIP and Backlog.

Best Practice

Keep Percent Complete current on Fixed Fee phases by reviewing it regularly rather than only at invoicing time. Hourly and Hourly NTE phases will stay accurate automatically as time is logged, so your attention is best spent on the Fixed Fee phases where a person's judgment is the driving input.

Summary

Earned Value is calculated per phase, then summed to the project level. Fixed Fee phases use Percent Complete × Fee Amount; Hourly phases use the total Billing Value of related billable time slips; Hourly NTE phases use the lesser of the not-to-exceed limit or total Billing Value. Percent Complete is the one manually maintained input, and keeping it current is essential since it drives Earned Value — and downstream figures like WIP and Backlog — for Fixed Fee work.