Earned Value Management – How to?

Earned Value Management (EVM) is a way to analyze project performance that combines schedule performance and cost performance to answer the question, “What did we get for the money we spent?”. In this article, I want to discuss the basics of successfully presenting Earned Value.

Basic measurements that are required to measure EVM:

  • Planned Value (PV) or BCWS = is the total cost of the work scheduled / planned as of reporting date [Answers: How much work should be done by now?]
  • % Complete = task progress or physical percent complete
  • Actual Costs (AC) or ACWP = Total amount spent on a task up to the current date

Then, calculate Earned Value (EV) = BAC * % Complete. Plot Earned Value Analysis on chart, as follows:

Then, measure other Performing Indices

  • Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC) [indicates over/under budget]
  • Cost Performance Index (CPI) = CV/EV [> 1 indicates efficiency in utilizing the resources]
  • Schedule Variance (SV) = Earned Value (EV) – Actual Cost (AC) [indicates ahead/behind schedule]
  • Schedule Performance Index (SPI) = EV/PV [> 1 indicates project team is very efficient in utilizing the time allocated to the project]

Then, Forecast the Future Performance Trends

  • To-Complete Performance Index (TCPI) = (BAC-EV) / (BAC-AC). Indicates the CPI required throughout the remainder of the project to stay within the stated budget. In other words, it is an index showing the efficiency at which the resources on the project should be utilized for the remainder of the project.
  • Estimate at Completion (EAC) = AC + ((BAC-EV)/CPI). A forecast of total costs that will be accrued by project completion based on past cost performance trends.
  • Variance at Completion (VAC) = EAC – BAC. The difference between the new Estimate at Completion and the original Budget at Completion.

How do you start?

  1. Create a detailed project schedule with budget allocated for each tasks
  2. Baseline the project schedule
  3. On Status reporting date, Enter a) % Complete and b) Actual Cost (AC)
  4. Generate Earned value Chart

In subsequent article, I’ll show you how to create EVM charts if budget info is not available.

Advertisements

3 thoughts on “Earned Value Management – How to?

  1. Sam December 6, 2012 / 1:49 pm

    Schedule Variance (SV) = Earned Value (EV) – PV

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s