1.
“PMP® Certification Readiness”
Training Program
Module:Module:
Earned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget Forecasting
Ravikumar Kalose N, PMP®
http://www.propmacademy.com
1
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2.
Understanding –
• Measurements - Subjective Vs Objective
• What is Earned Value (EV)
• Work Performance MeasurementsWork Performance Measurements
• Budget Forecasts
• Performance measurement parameters
• Various formulae and their interpretation
2
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3.
Green
OR Red
?
What
IF…??
?
Can defend the
current Project
StatusAssertive
Relies on assumptions, interpretations based on
high level work status
Lack of any measured data and facts
Project Health (Red/Amber/Green) is debatable
and subjective
Relies on measured values derived from triple
constraints – Scope, Time and Cost
Project Status reported based on defined matrix
Unambiguous, No Assumptions
Easily understandable by Stakeholders
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4.
An objective method to measure project progress based on triple
constraints (Scope, Time, Cost)
EV measurements helps to determine if a project is on track
EV is an indicator of current project performance
Provides early warnings and trends on any cost, schedule over runs
Earned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value Characteristics
Earned value indicates how much of “value” you have “earned” on
the project at any given point of time.
Helps determine variance against Planned Value (PV).
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5.
Let us consider the following example to understand the
concepts better
An ERP implementation project for ABC company is estimated
to cost $500,000 with an estimated duration of 40 weeks.At
the end of 10 weeks the project is 20% complete withthe end of 10 weeks the project is 20% complete with
$150,000 being already spent on the project.
BAC =500,000,AC = 150,000
PV = 10/40*500,000 = 125,000
EV = 20/100*500,000 = 100,000
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6.
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7.
BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000
MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis
CV EV-AC -50,000 This indicates $50,000 has already been
additionally spent in excess of the project worth of
work up-to this point
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SV EV-PV -25000 The negative value indicates the project is lagging
behind its planned schedule.
CPI EV/AC 0.67 A value less than 1 indicates over utilization of
funds against the actual work. In this case the
project is earning $0.67 worth value for every $
spent, not a good sign.
SPI EV/PV 0.80 A value less than 1 indicates that the project is
behind planned schedule and progress has only
been at 80% .

8.
SV
CV
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9.
MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis
EAC BAC/CPI 746,268.65 The revised estimates now for project
completion based on current performance is
$746,268.65 as against planned $500,000.
BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000
CV = -50,000 SV = -25,000 CPI = 0.67 SPI = 0.80
ETC EAC-AC 596,268.65 The project would now require $596,268.65
to complete
VAC BAC-EAC -246,268.65 There is an additional $246,268.65 required
to complete the project compared to original
estimates
TCPI (BAC-EV)/(BAC-AC)
(WORK LEFT TO
DO)/ MONEY
REMAINING)
1.14 The project need to now perform at 1.14 times
in order to stay within the estimated budget
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10.
Terminology Description Formula
Budget At CompletionBudget At CompletionBudget At CompletionBudget At Completion
(BAC)(BAC)(BAC)(BAC)
The original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project Cost NoneNoneNoneNone
Planned Value (PV)Planned Value (PV)Planned Value (PV)Planned Value (PV) Indicates amount of work which “SHOULD haveIndicates amount of work which “SHOULD haveIndicates amount of work which “SHOULD haveIndicates amount of work which “SHOULD have
been completed” or “Authorized work forbeen completed” or “Authorized work forbeen completed” or “Authorized work forbeen completed” or “Authorized work for
completion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any point
PV=Planned %PV=Planned %PV=Planned %PV=Planned %
complete X BACcomplete X BACcomplete X BACcomplete X BAC
Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual %EV= Actual %EV= Actual %EV= Actual %
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Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual %EV= Actual %EV= Actual %EV= Actual %
complete X BACcomplete X BACcomplete X BACcomplete X BAC
Actual Cost (AC)Actual Cost (AC)Actual Cost (AC)Actual Cost (AC) The actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of time AC= CumulativeAC= CumulativeAC= CumulativeAC= Cumulative
money spent till datemoney spent till datemoney spent till datemoney spent till date
Cost Variance (CV)Cost Variance (CV)Cost Variance (CV)Cost Variance (CV) The difference between howThe difference between howThe difference between howThe difference between how much was actuallymuch was actuallymuch was actuallymuch was actually
EarnedEarnedEarnedEarned and how muchand how muchand how muchand how much was awas awas awas actually spentctually spentctually spentctually spent
CV=EVCV=EVCV=EVCV=EV----ACACACAC
ScheduleScheduleScheduleSchedule Variance (SV)Variance (SV)Variance (SV)Variance (SV) The difference between plannedThe difference between plannedThe difference between plannedThe difference between planned schedule Vsschedule Vsschedule Vsschedule Vs
Actual ScheduleActual ScheduleActual ScheduleActual Schedule
SV = EVSV = EVSV = EVSV = EV----PVPVPVPV

11.
TerminologyTerminologyTerminologyTerminology DescriptionDescriptionDescriptionDescription FormulaFormulaFormulaFormula
CostCostCostCost Performance IndexPerformance IndexPerformance IndexPerformance Index
(CPI)(CPI)(CPI)(CPI)
Indicates the projectIndicates the projectIndicates the projectIndicates the project performance for every $performance for every $performance for every $performance for every $
spentspentspentspent
CPCPCPCPI = EV / ACI = EV / ACI = EV / ACI = EV / AC
Schedule PerformanceSchedule PerformanceSchedule PerformanceSchedule Performance
Index (SPI)Index (SPI)Index (SPI)Index (SPI)
Indicate actualIndicate actualIndicate actualIndicate actual schedule progress of theschedule progress of theschedule progress of theschedule progress of the
against the planned scheduleagainst the planned scheduleagainst the planned scheduleagainst the planned schedule
SPI = EV / PVSPI = EV / PVSPI = EV / PVSPI = EV / PV
Estimate At CompletionEstimate At CompletionEstimate At CompletionEstimate At Completion
(EAC)(EAC)(EAC)(EAC)
TheTheTheThe revised project Budget for completionrevised project Budget for completionrevised project Budget for completionrevised project Budget for completion
based on current performance indicatorsbased on current performance indicatorsbased on current performance indicatorsbased on current performance indicators
EAC = BAC /EAC = BAC /EAC = BAC /EAC = BAC /
Cumulative CPICumulative CPICumulative CPICumulative CPI
Estimate To CompleteEstimate To CompleteEstimate To CompleteEstimate To Complete
(ETC)(ETC)(ETC)(ETC)
How much more (cost)How much more (cost)How much more (cost)How much more (cost) would be needed towould be needed towould be needed towould be needed to
complete the project based on currentcomplete the project based on currentcomplete the project based on currentcomplete the project based on current
performance indicatorsperformance indicatorsperformance indicatorsperformance indicators
ETC = EACETC = EACETC = EACETC = EAC –––– ACACACAC
Variance At CompletionVariance At CompletionVariance At CompletionVariance At Completion
(VAC)(VAC)(VAC)(VAC)
TheTheTheThe difference between the budgeted costdifference between the budgeted costdifference between the budgeted costdifference between the budgeted cost
and revised estimates based on currentand revised estimates based on currentand revised estimates based on currentand revised estimates based on current
performance indicatorsperformance indicatorsperformance indicatorsperformance indicators
VAC = BACVAC = BACVAC = BACVAC = BAC –––– EACEACEACEAC
ToToToTo----CompleteCompleteCompleteComplete
Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)
ProjectProjectProjectProject Performance required to be achievedPerformance required to be achievedPerformance required to be achievedPerformance required to be achieved
in order to stay within the original budgetin order to stay within the original budgetin order to stay within the original budgetin order to stay within the original budget
using the remaining fundsusing the remaining fundsusing the remaining fundsusing the remaining funds
TCPI = (BACTCPI = (BACTCPI = (BACTCPI = (BAC----EV) /EV) /EV) /EV) /
(BAC(BAC(BAC(BAC----AC)AC)AC)AC)
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12.
Variance Value (SV, CV, VAC) :Variance Value (SV, CV, VAC) :Variance Value (SV, CV, VAC) :Variance Value (SV, CV, VAC) : If Negative, it is below planned performance,
If Positive, it is above planned performance
If Zero, it is exactly meeting the planned
performance
Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI): If the Value is less than 1, it is below planned
performance
If the Value is more than 1, it is above
planned performance
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planned performance
If the Value is equal to 1, it is exactly meeting
the planned performance
TCPI:TCPI:TCPI:TCPI: If the Value is Less than 1, it is above
planned performance
If the Value is more than 1, it is below
planned performance
If the Value is Equal to 1, it is exactly meeting
the planned performance

13.
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14.
Thank You
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Thank You