Earned Value AnalysisHOW TO KNOW WHERE YOUR PROJECT IS

BY DAVID EDGEWORTH

Earned Value (EVM)

A technique of Cost Control that compares what you’ve received or produced to what you’ve spent by monitoring the planned value, earned value, and actual costs expected to produce the work of the project

Needed to determine and document the cause of the variance, to determine the impact or the variance, and to determine whether a corrective action should be implemented as a result

EMV looks at schedule, cost, and scope project measurements together and compares them to actual work completed to date

Planned Value (PV) Planned Value is the cost of work that has been authorized and

budgeted for a scheduled activity or Work Breakdown Structure component during a given time period or phase

PV is also known as the budget cost of work scheduled (BCWS) It is usually a chart comparing Earned Value and Actual Cost

EV=3.8k AC=5k PV=4.5k

0 months 10 months$0$1,000$2,000$3,000$4,000$5,000$6,000

Visual Representation of Current Project Budget

Earned Value Acutual Cost Planned Value

Actual Cost (AC)

Actual Cost is the cost of complementing the work component in a given time period

Also known as actual cost of work performance (ACWP)

Earned Value (EV)

Earned value is the value of the work completed to date as it compares to the budgeted amount (PV) for the work component

EV is typically expressed as a percentage of work complete compared to the budget

Also known as budget cost of work performed (BCWP) Example-Budget amount is $1,000 and we have completed 30% of

the work at this date. EV=1000 x 30% so our EV= $300

Recap

PV=is the approved budget assigned to the work to be completed in a given time

AC=the money (indirect or direct) that has actually been spent during a given time period toward the completed work

EV=the value of the work completed at this moment compared to where you were suppose to be according to the budget

Cost Variance (CV)Are we on budget?

Cost Variance = Earned Value – Actual Cost Example: Lets say the

Planned Cost (budgeted) (also known as the Planned Value) = $720k Actual Cost = $600k Earned Value = $680k Our CV = EV-AC

680-600 = +80 a positive number means we are most likely going to be under budget

Schedule Variance (SV)

Compares an activity’s actual progress to date to the estimated progress and is represented in terms of cost

Tells you if the schedule is going to be ahead of schedule, on time, or behind

Schedule Variance = Earned Value – Planned Value Example: Lets say the

Planned Cost (budgeted) (also known as the Planned Value) = $720k Earned Value = $680k

680-720= -40 a negative number indicates the project is behind schedule

Performance Indexes

These are used to predict future project performance All start with what you have (EV)

Cost Performance Index (CPI)

Measures the values of work completed at this date (today) against actual cost

Cost Performance Index = Earned Value/Actual Cost Example: Lets say the

Actual Cost = $600k Earned Value = $680k 680/600 = 1.13 as the number is more than 1 it means your performance

is better than expected

Schedule Performance Index (SPI)

SPI measures the progress today against what is planned Schedule Performance Index=Earned Value/Planned Value Example: Lets say the

Planned Cost (budgeted) (also known as the Planned Value) = $720k Earned Value = $680k 680/720= 0.94 as the value is less than 1 the project is behind schedule

Estimate at Completion (EAC)

EAC is used to forecast the total project budget based on the current project performance and the remaining work

To get EAC you need to know Budget at Completion (BAC)

The total amount of the budget for the work Estimate to Complete (ETC)

The cost estimate for the remaining project work (usually gotten from expert judgment) Estimate at Completion=Actual Cost + Estimate to Complete

Example: Lets say the Planned Cost (budgeted) (also known as the Planned Value or BAC ) = $720k Actual Cost = $600k Estimate to Complete = $100k 600+100 = 700 as ETC is less than BAC you will most likely be under budget

To-Complete Performance Index (TCPI)

TCPI is the projected performance level that the remaining work of the project must achieve in order to meet the stated financial or scheduled goals

To-Complete Performance Index = Budget at Completion (BAC) – Earned Value (EV)

Budget at Completion (BAC) – Actual Cost (AC) Example:

Planned Cost (budgeted) (also known as the Planned Value or BAC ) = $720k Actual Cost = $600k Earned Value = $680k (720-680) = 40 40/120 = 0.33 the TCPI is less than 1 so future work does

not have (720-600) = 20 to be as efficiently as past performance to meet the planned schedule

Variance Analysis (VA)

Variance Analysis is a comparison of planned results with actual project results

Most frequently used to examine the project schedule and project budget

Variance At Completion (VAC)

Variance At Completion calculates the difference between the budget at completion and the estimate at completion

Variance At Completion (VAC)= Budget at Completion (BAC)- Estimate at Completion (EAC) Example:

Planned Cost (budgeted) (also known as the Planned Value or BAC ) = $720k

Estimate at Completion (EAC)= $100k 720-100= 620 VAC indicates we have a positive number meaning the

project was efficient

Final Cost (FC)

Final Cost can be predicted with the following equation Final Cost (FC)=Budgeted Cost/Cost Performance Index (CPI) Example:

Planned Cost (budgeted) (also known as the Planned Value or BAC ) = $720k Cost Performance Index (CPI) = 1.13

720/1.13 = 637.17 meaning the final cost is projected to be $637.17k

Final Project Duration

Final Project Duration is how long the project will take at the current level of effort

Final Project Duration = Planned Project Duration/Schedule Performance Index (SPI) Example

Planned Project Duration = 20 months Duration/Schedule Performance Index (SPI) = 0.94 20/0.94=21.27 months

At the current effort the project will take about 5 to 6 weeks longer to finish

What this means CV = a positive number we will most likely be under budget CV = a negative number we will most likely be over budget SV = a positive number we will most likely be ahead of schedule SV = a negative number we will most likely be behind schedule SV = zero we are neither ahead nor behind schedule CPI = more than 1 means your performance is better than expected CPI = less than 1 means your performance is worse than expected SPI = more than 1 the project is ahead of schedule SPI = less than 1 the project is behind schedule EAC = if less than BAC you will most likely be under budget EAC = if more than BAC you will most likely be over budget TCPI = less then 1 future work does not have to be as efficient as past performance

to meet the goal TCPI = more then 1 future work must be more efficient as past performance to meet

the goal