# Earned Value - What is it?

 Simply, it is a project monitoring and measurement system that:
o establishes a clear relationship between planned accomplishments
and actual accomplishments
o reinforces and rewards good planning practices
 Basic concepts of Earned Value Management (EVM)
o Each task in a project earns value as planned work is completed
 For example (perhaps), if you were paid on this basis, you
would earn \$\$ at key milestones based on the value of what
you have completed (earned value)
o Earned value can be compared to actual cost and budgeted cost to
determine variance and predict future performance
 The budgeted cost (e.g., dollars, person-hours, person-days, etc.) in terms
of your baseline plan/budget of the work performed up to a specified point
in time
o Also known as Budgeted Cost of Work Performed (BCWP)
 Each task in the Work Breakdown Structure (WBS) is assigned a BCWP
based on its individual cost.
o Project BCWP is total of BCWP for all tasks required to complete the
project

Earned Value Components
 Planned Value (a.k.a. BCWS)

 How much work (person-hours) you planned to have accomplished
at a given point in time (this is from the WBS in your plan)
 Actual Cost (a.k.a. ACWP)

 How much work (person-hours) you have actually spent at a given
point in time
 Earned Value (a.k.a. BCWP)

 The value (person-hours) in terms of your base budget of what you
have accomplished at a given point in time (or, % complete X
Planned Value)

BCWS) = 18 + 10 + 16 + 6 = 50  EARNED VALUE (Budgeted cost of the work performed. Earned Value: Example On Day X:  PLANNED VALUE (Budgeted cost of the work scheduled. BCWP) = 18 + 8 + 14 + 0 = 40 .

Earned Value: Example .

but it adds to cost… schedule on track… over budget on expenses (cost) Performance Indices  Cost Performance Index . work completed  Example: applying more \$\$/people to a task may maintain the schedule.Variance  Any schedule or cost deviation from a specific plan.  Used within an organization to verify the budget and schedule for a project  Frequently used as a key component of plan reviews and performance measurement  Must compare scheduling and budget variance at the same time  Schedule variance: deviations from work planned – not a measure of changes in cost  Cost variance: deviations from the budget – not a measure of work scheduled vs.

0 d.75 b.0  exceptional performance  CPI < 1. 0  If BCWP is 27 pm BCWS is 25 pm. CPI: a. Ahead of schedule c. ACWS  True or False: At any point in time.33 c. ACSP c. you are probably: a. 1. BCWS d. BCWP b. Behind schedule d. a. TRUE b. 1.  CPI = BCWP/ACWP  Schedule Performance Index  SPI = BCWP/BCWS  Analysis  CPI > 1.0  poor performance  Similar for SPI Quiz  The EV measurement of work you planned to have accomplished at a given point in time : a. . the SPI tells you exactly how far ahead or behind schedule you are on your project. None of the above . FALSE  If BCWP is 20 pm and ACWP is 15 pm. On schedule b.

at best)  Cost Variance = BCWP . measurable tasks (e.00 (or.. or 80% of plan (a B-.Earned Value & Variance: Example On Day X:  PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50  EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40  ACTUAL COST (ACWP) = 45 (from your project tracking) Therefore:  Schedule Variance = BCWP – BCWS = 40 .45 = -5  Cost Performance Index = 40/45 = ..89.ACWP = 40 .50 = -10 (behind schedule)  Schedule Performance Index = 40 / 50 = 0.g. project management. or you’re getting an 89¢ return on every \$1. person-hour) spent on this project Primary Measurement Methods  Measurable efforts  Discrete increments of work with definable schedule and tangible results (i. training) .8. real tasks with a deliverable)  Level of effort  Work that is not discernable in discrete.e.

Rs400K = -Rs100K  Behind schedule.Rs325K  Over budget by Rs25K Earned Value Management  How can you use this information?  Careful analysis of variance and trends  Resetting schedule or budget. but what does the Rs100K in variance really mean?  CV = BCWP – ACWP = Rs300K . discrete tasks  Allocate 100% at start of task  Allocate 100% at end of task  Best solution if you keep tasks very small  Allocate value at Critical Milestones  Good solution when using with contract work  Others? Another Example Project  Suppose BCWP is Rs300K  How is this determined?  What conclusions now?  SV = BCWP – BCWS  SV = Rs300k . 50% at end  But only for small.Determining % Complete – When?  Allocate based on time spent – but what if you spend more time than allocated?  Allocate 50% at start of task. when appropriate  Variance Analysis Questions  What is the problem causing the variance? .

 What is the impact on time. if any?  What corrective action is planned or under way?  What are the expected results of the corrective action?  Extraordinary variance or alarming trends may be cause for reset or cancellation of a project. cost and performance?  What is the impact on other efforts. but where do you draw the line?  How much variance to allow depends on a number of factors:  Life-cycle phase  Length of life-cycle phase  Length of project  Type of estimate  Accuracy of estimate Variance Projection Performance Index Trends .

Ideal Performance Index Closing Thoughts: Management Reserve .

government contract cost tracking often must include:  BCWS  BCWP  ACWP  Estimated cost at completion  Budgeted cost at completion  Cost and schedule variances with explanations  Traceability Summary  Cost. not the project manager. can be used to analyze progress of a project  Using Earned Value data to make critical project decisions must be based on careful analysis of data. Closing Thoughts: Government Requirements  U.  The padding always added to a project for unexpected costs that are within project scope  Not an allowance for changes to scope  Not part of the cost estimate  Added by upper management. variances and trends . in the form of Earned Value or BCWP.S.