Earned value analysis training

1. Earned Value Analysis Training GPA – Confidential

2. 2 Earned Value Analysis Training Contents Context What is EVA Why Use It? How will we use it EVA examples EVA and MSP What next? Who to contact GPA – Confidential

3. 3 Earned Value Analysis Training Context GPA – Confidential

4. 4 Earned Value Analysis Training GPA – Confidential PM Technique • Earned Value Analysis (EVA) is a project management technique for monitoring the cost and schedule performance of projects

5. 5 Earned Value Analysis Training GPA – Confidential PM Technique ✔ PMI • Earned Value Analysis (EVA) is a project management technique for monitoring the cost and schedule performance of projects • Used within PMI but not exclusive to it

6. 6 Earned Value Analysis Training GPA – Confidential PM Technique ✔ PMI • Earned Value Analysis (EVA) is a project management technique for monitoring the cost and schedule performance of projects • Used within PMI but not exclusive to it • Compares actual and budgeted resources

7. 7 Earned Value Analysis Training GPA – Confidential PM Technique Cost Schedule Cost Status Schedule Status ✔ PMI • Earned Value Analysis (EVA) is a project management technique for monitoring the cost and schedule performance of projects • Used within PMI but not exclusive to it • Compares actual and budgeted resources • Works by comparing project actuals and budgeted resources expenditures to show variance from original project plan in terms of cost and schedule.

8. 8 Earned Value Analysis Training GPA – Confidential PM Technique Cost Schedule Monitor PerformanceCost Status Schedule Status ✔ PMI • Earned Value Analysis (EVA) is a project management technique for monitoring the cost and schedule performance of projects • Used within PMI but not exclusive to it • Compares actual and budgeted resources • Works by comparing project actuals and budgeted resources expenditures to show variance from original project plan in terms of cost and schedule. • MSP supports EVA but the technique can be applied without software

9. 9 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it has a budget of £10

10. 10 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent.

11. 11 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure wasn’t forecast until September

12. 12 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure was not forecast until September •20% of the budget to last the remaining two thirds of the project!

13. 13 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure was not forecast until September •20% of the budget to last the remaining two thirds of the project! ?

14. 14 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure was not forecast until September •20% of the budget to last the remaining two thirds of the project! ? Is this a problem?

15. 15 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure was not forecast until September •20% of the budget to last the remaining two thirds of the project! ? Is this a problem? Two possible scenarios Scenario 1 – Over Budget. Planned amount of work, Greater costs Scenario 2 – Ahead of Schedule. Planned costs, Faster completion

16. 16 Earned Value Analysis Training GPA – Confidential Why Use EVA? Consider the following project •In April it had a budget of £10 •By June 80% of the budget has been spent. •This level of expenditure was not forecast until September •20% of the budget to last the remaining two thirds of the project! ? Is this a problem? Two possible scenarios Scenario 1 – Over Budget. Planned amount of work, Greater costs Scenario 2 – Ahead of Schedule. Planned costs, Faster completion EVA gives the Project manager the technique to see which Scenario is valid

17. 17 Earned Value Analysis Training EVA lets the Project Manager know if the project is •On budget using Cost Variance •On schedule using Schedule Variance EVA Establishes GPA – Confidential Cost Variance (CV)Cost Variance (CV) The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on having lost or saved money

18. 18 Earned Value Analysis Training EVA lets the Project Manager know if the project is •On budget using Cost Variance •On schedule using Schedule Variance EVA Establishes GPA – Confidential Cost Variance (CV)Cost Variance (CV) Schedule Variance (SV) Schedule Variance (SV) The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule

19. 19 Earned Value Analysis Training EVA lets the Project Manager know if the project is •On budget using Cost Variance •On schedule using Schedule Variance •The estimatedcost to complete the project EVA Establishes GPA – Confidential Cost Variance (CV)Cost Variance (CV) Schedule Variance (SV) Schedule Variance (SV) The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule Estimate at Completion (EAC) Estimate at Completion (EAC) How much it will cost in total to complete the task if current spending patterns are maintained How much it will cost in total to complete the task if current spending patterns are maintained

20. 20 Earned Value Analysis Training To carry out EVA the following information is needed GPA – Confidential Planned Value (PV)Planned Value (PV) Actual Cost (AC)Actual Cost (AC) Total budget for a specific Work Breakdown StructureTotal budget for a specific Work Breakdown Structure Amount it actually cost to complete a specific WBS item during a specific period Amount it actually cost to complete a specific WBS item during a specific period Earned Value (EV)Earned Value (EV) Approved budget for actual work on a given WBS item during a specific period Approved budget for actual work on a given WBS item during a specific period BCWSBCWS Budgeted cost of work scheduledBudgeted cost of work scheduled ACWPACWP Actual cost of work performedActual cost of work performed

21. 21 Earned Value Analysis Training GPA – Confidential Cost Variance (CV)Cost Variance (CV) The difference between what you planned to spend and what you actually spent based on having lost or saved money The difference between what you planned to spend and what you actually spent based on having lost or saved money Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC) Cost Variance (CV) is a measure of project performance and indicates how much over or under budget a project is. A positive figure means the project is under budget No difference means the project is on budget A negative figure means the project is over budget Cost Variance can also be articulated as the following convenient indicators Cost Variance Percentage (CV%) = Cost Variance (CV) / Earned Value (EV) * 100 Cost Variance % indicates how much over or under budget the project is in terms of percentage Cost Performance Indicator (CPI) = Earned Value (EV) / Actual Cost (AC) Cost Performance Indicator is an index showing the efficiency of utilisation of the resource on the project

22. 22 Earned Value Analysis Training GPA – Confidential Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV) Schedule Variance (SV) is a measure of project performance and indicates how much ahead of or behind schedule a project is. A positive figure means the project is ahead of schedule No difference means the project is on schedule A negative figure means the project is behind schedule Schedule Variance can also be articulated as the following convenient indicators Schedule Variance Percentage (SV%) = Schedule Variance (SV) / Planned Value (PV) * 100 Schedule Variance % indicates how much ahead or behind schedule a project is in terms of percentage Schedule Performance Indicator (SPI) = Earned Value (EV) / Planned Value (PV) Schedule Performance Indicator is an index showing the efficiency of time utilised on the project Schedule Variance (SV) Schedule Variance (SV) The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule The difference between what you planned to spend and what you actually spent based on being ahead of or behind schedule

23. 23 Earned Value Analysis Training GPA – Confidential Estimate At Completion = Actual Cost (AC) / Earned Value (EV) * Total Budget Estimate At Completion (EAC) is the estimated cost of the project at the end of the project Estimate at Completion (EAC) Estimate at Completion (EAC) How much it will cost in total to complete the task if current spending patterns are maintained How much it will cost in total to complete the task if current spending patterns are maintained

24. 24 Earned Value Analysis Training GPA – Confidential A Practical Example The Lord of the Manor requires 20 family portraits be painted and ready for the next Ball. The Lord of the Manor has commissioned a painter to paint the portraits and will pay him £150 a day. The painter estimates that each portrait will take 20 working days to complete. Today it is the 30th April 2013. The Ball takes place on the 8th November 2014.

25. 25 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept • The project starts on the 30th April • The Lord of the Manor asks for a status update on the 1st September • By the 1st of September the original project plan showed that the painter should have completed 4 portraits, each taking 20 days at a cost of £150 a day. Equating to a cost of £3,000 per portrait

26. 26 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept • The project starts on the 30th April • The Lord of the Manor asks for a status update on the 1st September • By the 1st of September the original project plan showed that the painter should have completed 4 portraits, each taking 20 days at a cost of £150 a day. Equating to a cost of £3,000 per portrait The Planned Value is calculated as follows. Planned Value (PV) = £3,000 * 4 portraits = £12,000

27. 27 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept • The project starts on the 30th April • The Lord of the Manor asks for a status update on the 1st September • By the 1st of September the original project plan showed that the painter should have completed 4 portraits, each taking 20 days at a cost of £150 a day. Equating to a cost of £3,000 per portrait The Planned Value is calculated as follows Planned Value (PV) = £3,000 * 4 portraits = £12,000 However, the painter has only completed 3 portraits. The Earned Value is calculated as follows Earned Value (EV) = £3,000 * 3 portraits = £9,000

28. 28 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept • The project starts on the 30th April • The Lord of the Manor asks for a status update on the 1st September • By the 1st of September the original project plan showed that the painter should have completed 4 portraits, each taking 20 days at a cost of £150 a day. Equating to a cost of £3,000 per portrait The Planned Value is calculated as follows Planned Value (PV) = £3,000 * 4 portraits = £12,000 However, the painter has only completed 3 portraits. The Earned Value is calculated as follows Earned Value (EV) = £3,000 * 3 portraits = £9,000 The painter only completed 2 portraits as two of the portraits took 30 days to finish and not 20 days as originally planned. Representing a 50% increase on the original estimate of £3,000 per portrait The Actual Cost is calculated as follows Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000

29. 29 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 From this the Cost Variance (CV), Cost Variance % (CV%) and Cost Variance Indicator (CVI) can be calculated

30. 30 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 From this the Cost Variance (CV), Cost Variance % (CV%) and Cost Variance Indicator (CVI) can be calculated Cost Variance (CV) = EV £9,000 – AC £12,000 = -£3,000

31. 31 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 From this the Cost Variance (CV), Cost Variance Percentage (CV%) and Cost Variance Indicator (CVI) can be calculated Cost Variance (CV) = EV £9,000 – AC £12,000 = -£3,000 Cost Variance Percentage (CV%) = CV -£3,000 / EV £9,000 * 100 = -33%

32. 32 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 From this the Cost Variance (CV), Cost Variance Percentage (CV%) can be calculated Cost Variance (CV) = EV £9,000 – AC £12,000 = -£3,000 Cost Variance Percentage (CV%) = CV -£3,000 / EV £9,000 * 100 = -33% In real terms this means the project to date has cost £3,000 more than the Lord of the Manor planned to pay and is 33% over budget

33. 33 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 Cost Variance (CV) = EV £9,000 – AC £12,000 = -£3,000 Cost Variance Percentage (CV%) = CV -£3,000 / EV £9,000 * 100 = -33% The Schedule Variance (SV) and Schedule Variance Percentage (SV%) can now be derived Schedule Variance (SV) = EV £9,000 – PV £12,000 = -£3,000 Schedule Variance Percentage (SV%) = SV £9,000 – PV £12,000 * 100 = 25%

34. 34 Earned Value Analysis Training GPA – Confidential Start 30th April Start 30th April End 8th Nov End 8th Nov Update 1st Sept Update 1st Sept Planned Value (PV) = £3,000 * 4 portraits = £12,000 Earned Value (EV) = £3,000 * 3 portraits = £9,000 Actual Cost (AC) = £3,000 * 1 portrait + £4,500 * 2 portraits = £12,000 Cost Variance (CV) = EV £9,000 – AC £12,000 = -£3,000 Cost Variance Percentage (CV%) = CV -£3,000 / EV £9,000 * 100 = -33% The Schedule Variance (SV) and Schedule Variance Percentage (SV%) can now be derived Schedule Variance (SV) = EV £9,000 – PV £12,000 = -£3,000 Schedule Variance Percentage (SV%) = SV £9,000 – PV £12,000 * 100 = 25% The painter has done £3,000 less worth of work than the Lord of the Manor had expected at this point and is 25% behind schedule.

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