The Three Pillars of Earned Value Management
Earned value is helpful for tracking project progress against goals in a very metrics-driven way. However, if you don't do it carefully, the metrics that result can be misleading.
Earned value is the measure of how much of the technical work of the project has been completed. It is measured against the planned value, or the measure of the amount of the technical work that is supposed to be completed within each particular timeframe. Together, these two measures provide a picture - but not the complete picture. In essence, they show the schedule component - how much value has been achieved versus how much value was planned. However, costs can be ahead or behind schedule in this situation, thus providing a skewed view.
The view is more complete when actual cost (AC) is added to the mix. Buy tracking actual cost along the same timeline as earned value and planned value, the viewer can see not only the schedule component but also the cost component. the viewer can now see if the project is running according to schedule and within budget.
The schedule and budget aspects are not necessarily independent variables. Progress can be accelerated by spending more money up front, increasing actual costs. It can also be decelerated by decreasing actual costs. the viewer needs to see the interplay of these cost and schedule variable together in order to determine if the project is on track.
The metrics do not actually capture a "quality" variable. Thus, related to the triple constraint of time, quality, and cost, the earned value calculation does not consider quality. Quality however is considered to be adequate versus standards set for each timeframe.
Thus it is that the three critical variables that are important for earned value management calculations include Planned Value (PV), Earned Value (EV), and Actual cost (AC). Without all three measures, the progress on the project may not be depicted accurately, resulting in an unclear understanding of project status.