Earned Value Techniques

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Earned Value Techniques

forProject Cost Control

Dr. Robert Monson

University of St. Thomas


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Copyright 2001 R.J.Monson

Earned Value Concepts

Earned Value (EV) is a cost managementtechnique where the value of completed

work is compared to actual costs and the

scheduled costsEarned Value is expressed in terms of $s,

so that completed work can be compared to

actual costs and spend plans


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Earned Value Calculations

EV is calculated by multiplying an estimateof the task percent completeby the totalestimated cost for that task

Example5 week long task costing $10,000Task reported as 37% complete

Value of work completed =>.37*10,000 = $3,700


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Why use Earned Value?

Consider a project where you are running at$90,000 or 90% of spend plan. In traditional

reporting you would consider yourself

under budgetIf the earned value of that work is $80,000,

and the spend plan says $90,000, you would

realize you are over budget as well asbehind schedule


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Example

Task 1

Budget of $10,000

Estimated to be 40% complete

We have spent $5,000 based on accounting

We thought we would spend $3,000 by this date

What is the status of this task?

Overrun (Because EV is $4,000 vs. $5,000)

Ahead of Schedule (Because EV is $4,000 vs. $3,000)


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Metrics for Cost Control

Cost Variance

CV = BCWP ACWP = EV ACWP

Difference between work completed and actual costs

This is where you are on the tasks vs. $s chart

Schedule Variance

SV = BCWP BCWS = EV BCWS

Difference between work completed and work

scheduled

This is your monetary burn rate


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Metrics for Cost Control

Cost Variance IndexCV% = CV/BCWP

Ratio of work completed to $s spent

Schedule Variance IndexSV% = SV/BCWS

Ratio of work completed to work planned


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How do we normally evaluate projects?

Tasks

Time


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Evaluating Status

Tasks

Time

37% Complete


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Budget Status

$

Time


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Project Evaluation

We cant really define whether we are onSpecification

Our Gannt chart doesnt really tell us whether we

are on ScheduleWe need to know the Budget curve to define if we

are spending at the correct rate

Therefore:We typically are considering the wrong variables!


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Project Evaluation

We have to discover what we are really

interested in

Whether the work is getting done close to

estimateWhether the work is progressing as planned

Do we think we can finish on Spec, Schedule

and Budget


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Task Evaluations

Tasks

$


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Task Evaluations

Tasks

$


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Task Evaluations

Tasks

$


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Budget Evaluations

Time

$


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Consider some examples

We must look at both pieces of information

in conjunction to get the whole picture

We need to know if we are:

Getting the work done for the right priceGetting the work done on schedule

From this information we define status


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Tasks

$

Time

$


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Tasks

$

Time

$


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Tasks

$

Time

$


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Project Evaluation

Consider the Earned Value of Tasks

To define if the work is truly getting completed

Consider the Cost Variance

Are we getting the work done for the moneyestimated?

Consider the Schedule Variance

Are we spending at the appropriate rate to stayon schedule?

Earned Value Techniques

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