This document discusses how Earned Value Analysis (EVA) can help project managers track project progress and costs to avoid cost overruns. EVA compares planned work, actual work completed, and actual costs to calculate variances. It uses three values - Planned Value (PV), Earned Value (EV), and Actual Costs (AC) - along with formulas to determine Schedule Variance, Cost Variance, and other metrics. Regular EVA reporting prevents projects from going significantly over budget or behind schedule without the project team's knowledge. The author argues that waiting until milestones to evaluate progress can be too late to course-correct struggling projects.
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Your Projects May Be Robbing You Blind
1. How Your Projects May Be
Robbing You Blind
Ed Kozak
expenditures). It also lets the project
One former client once remarked in a manager compute Percentage
Completion of the project as well as
workshop I was giving about Earned
Value Analysis “This is powerful stuff if forecast what the final cost of the project
applied correctly. I know our IT would be if spending rates continued at
department sure would benefit big time their current pace. The ability to
by using EVA. I personally believe they correctly use EVA rests on the ability to
intentionally do not want folks to correctly understand three variables, PV,
measure the earned value of their EV, and AC (referred to as BCWS,
projects for fear that top management BCWP, and ACWP in older texts) that
will crack down on them. What they do the project manager has to derive. All
not finish by year end is simply carried other numbers are calculated from these
over to the next year. They basically three variables using very simple
have an unlimited budget.” formulas.
This is a powerful statement and, Planned Value, or PV, simply is the
unfortunately, it isn’t rare to hear estimated cost of all of the work
something of this nature. Many scheduled to have been done by a
organizations are unaware of the fact it’s specific date, known as Status Date. For
possible to track and control costs example, if the project manager is
frequently and on a regular basis during preparing a monthly report to submit to a
a project and not have to wait until some client the Status Date would coincide
major milestone is reached months into with the most recent date reports were
the project to see how the budget is generated with the accounting system.
faring. As that person mentioned to in Planned Value is obtained from the
the quote above, that process is known budget estimate for the project that was
as Earned Value Analysis. created and agreed to (i.e. Baselined)
before the project began. This number it
never changes unless the scope changes
Earned Value Analysis and a new budget estimate is created and
baselined. In Earned Value Analysis,
Earned Value Analysis, or EVA, is a your original, baselined estimate is
method that lets a project manager called the BAC, short for Budget At
compare progress (work scheduled to be Completion.
done versus work actually done) and
costs (budget estimates versus actual It is understood that there are probably
going to be differences between what