Project managment 6 (a)

Earned Value Management

4/3/2011

Earned Value Analysis
Concepts


“The rabbit wouldn’t have lost the race if someone
informed about its performance time to time…”
From old story of Rabbit & Tortoise

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4/3/2011

WHAT IS EVA?
EVA is basically a methodology to track
1. Project Schedule Performance
2. Project Cost Performance
3. Project Progress



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Project Schedule Performance
to measure project
schedule
performance and determine time to
complete project
- i.e. measuring what is completed to date
what is expected to complete

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4/3/2011



Project Cost Performance
- to measure how much is spent against what
is expected to be spent

Benefits of EVA
1. For project managers
•
•
•
•
•

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Reliable project costs and schedule data for
more effective decision making
The relationship between cost, schedule and
work achieved
Ability to avoid last-minute “surprises”
Early identification of potential problems
Accurate prediction of project costs at
completion

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4/3/2011

Benefits of EVA
2. Provide ability to answer
◦
◦
◦
◦
◦

What did we get for money spent
How much will the project cost to
complete
When will the project be complete
Which activities are contributing to the
cost overrun
Which resources contributing to the
schedule slippage

Planned Value (PV)

Planned Value (PV). PV tells you what you plan to
do.
Planned Value = Physical Work + Approved
Budget
PV, also known as Budgeted Cost of Work
Scheduled (BCWS)
PV is categorized as:
Cumulative PV is the sum of the approved budget
for activities scheduled to be performed to date.
Current PV is the approved budget for activities
scheduled to be performed during a given period.

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4/3/2011

PV example
We are working on a Client/Server project, and part of
the scope is for Software Design. The time frame is 5
months and the budget for this scope is $15,000,
resulting in a budget of $3,000 per month.
Client/Server project – Software Design
Dollars
PV

JAN
3000

FEB
3000

MAR
3000

APR
3000

What is current and cumulative PV?

MAY
3000
As on today

The Cumulative PV is the total for the elapsed months:
January – March. The cumulative PV is $9,000.
The Current PV is the budget for the current month,
March, and equals $3,000.
Dollars
PV

JAN
3000

FEB
3000

MAR
3000

APR
3000

MAY
3000
As on today

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4/3/2011

Budget at Completion (BAC)
BAC is the sum of all budgets allocated to a
project scope.
◦ BAC can be obtained by work packages
◦ The Project BAC must always equal the Project
Total PV.
◦ If they are not equal, your earned value calculations
and analysis will be inaccurate.

What is the BAC for this project if Software Design is
the complete scope of the project?
Dollars
PV

JAN
3000

FEB
3000

MAR
3000

APR
3000

MAY
3000
As on today

•Yes, BAC = $15,000. And, in keeping with the previous
points about BAC
•The project BAC equals the Project Total PV.
•The Earned Value calculations are correct.

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4/3/2011

Actual Cost (AC)
Actual Cost (AC), also called actual
expenditures, is the cost incurred for
executing work on a project..
AC is also called Actual Cost of Work
Performed (ACWP).
Cumulative AC is the sum of the actual cost
for activities performed to date.
Current AC is the actual costs of activities
performed during a given period.

Cumulative AC is the sum of the actual cost for
activities performed to date, and Current AC is the
actual costs of activities performed during a given
period.

PV
AC

Dollars
JAN
3000
1100

FEB
3000
1200

MAR
3000
1500

APR
3000

MAY
3000

As on today

•The Cumulative AC is the total for the elapsed months: January –
March. The Cumulative AC is $3,800.
•The Current AC is the actual cost for the current month, March,
and equals $1,500.

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4/3/2011

Earned Value (EV)
EV is the quantification of the “worth” of the work
done to date.
EV tells us, in physical terms, what the project has
accomplished.
Cumulative EV is the sum of the budget for the
activities accomplished to date.
Current EV is the sum of the budget for the activities
accomplished in a given period.

Earned Value example
Dollars
PV
AC
EV

JAN
3000
1100
900

FEB
3000
1200
1000

MAR
3000
1500
1200

APR
3000

MAY
3000
As on today

• The Current EV is the sum of the budget for the activities
accomplished in the current month, March, and equals $1,200.
• The Cumulative EV is the sum of the budget for the activities
accomplished to date: January – March. The cumulative EV is
therefore $3,100.

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4/3/2011

Dollars
PV
AC
EV

JAN
3000
1100
900

Cum PV = $9,000
Cum AC = $3,800
Cum EV = $3,100

FEB
3000
1200
1000

MAR
3000
1500
1200

APR
3000

MAY
3000
As on today

Current PV = $3,000
Current AC = $1,500
Current EV = $1,200

BAC = $15,000


Actual Cost
(AC)

Budget At
Completion
(BAC)
Planned Value
(PV)

Earned Value
(EV)
As On Date

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4/3/2011




Schedule Variance (SV) = (BCWP – BCWS)
= (EV – PV)

◦ A comparison of amount of work performed during a
given period of time to what was scheduled to be
performed.
◦ A negative variance means the project is behind
schedule




Cost Variance (CV) = (BCWP – ACWP)
= (EV – AC)

◦ A comparison of the budgeted cost of work
performed with actual cost.
◦ A negative variance means the project is over
budget.

 Schedule

Performance Index (SPI)

SPI=BCWP/BCWS = EV/PV
 SPI<1 means project is behind schedule


 Cost

Performance Index (CPI)

CPI= BCWP/ACWP = EV/AC
 CPI<1 means project is over budget


 Cost

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Schedule Index (CSI)

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4/3/2011

CSI=CPI x SPI
 CSI <1, the project is over budget and behind
schedule
 Estimate At Completion (EAC)
 EAC = BAC/CPI
 Estimate to Complete (ETC)
 ETC = EAC – BAC


To-Complete Performance Index (TCPI)
 Is calculated projection of cost performance,
must be achieved on the remaining work
 That is ratio between remaining work and
funds remaining
 TCPI = (BAC-EV)/(BAC-AC)


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4/3/2011

A $10,000 software project is scheduled
for 4 weeks.
At the end of the third week, the project is
50% complete and the actual costs to
date is $9,000
Planned Value (PV) = $7,500
Earned Value (EV) = $5,000
Actual Cost (AC) = $9,000

Schedule Variance
= EV – PV = $5,000 – $7,500 = - $2,500
 Schedule Performance Index (SPI)
= EV/PV = $5,000 / $7,500 = 0.66
 Cost Variance
= EV – AC = $5,000 - $9,000 = - $4,000
 Cost Performance Index (CPI)
= EV/AC = $5,000 / $9,000 = 0.55
The metrics indicate the project is behind schedule
and over budget.
 On-target projects have an SPI and CPI of 1 or
greater


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4/3/2011

If the project continues at the current
performance, what is the true cost of the
project?
 Estimate At Complete


= Budget At Complete (BAC) / CPI
= $10,000 / 0.55 = $18,181
At the end of the project, the total project
costs will be $18,181

Formulas to recap:
SCHEDULE

COST

SV = EV – PV
SV = BCWP – BCWS

CV = EV – AC
CV = BCWP – ACWP

SPI = EV / PV
SPE = BCWP / BCWS

CPI = EV / AC
CPI = BCWP / ACWP

CSI = CPI * SPI
TCPI = (BAC-EV)/(BAC-AC)

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EAC = BAC / CPI
ETC = EAC - BAC

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4/3/2011

Questions ?

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14

Project managment 6 (a)

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