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Earned value provides an objective measurement of how much work has

been accomplished on a project. Using the earned value process, the
management team can readily compare how much work has actually
been completed against the amount of work planned to be accomplished.
All work is planned, budgeted, and scheduled in time-phased "planned
value" increments constituting a Performance Measurement Baseline
(PMB).

Let's look at a simplified example:

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Baseline plan
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The baseline plan shown in the above graph illustrates a task with a total
budget amount of $240k, which is planned for accomplishment over 24-
month time frame. The "time-now" line shows that $100k of the project
resources was planned to be completed at this point in the project.
Another way to look at this is that the project was planned to be 41.6%
complete ($100k / $240k) at this point in time.

As work is performed, it is "earned" on the same basis as it was planned,

in dollars or other quantifiable units such as labor hours. Comparing
earned value with the planned value measures the dollar value of work

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accomplished versus the dollar value of work planned. Any difference is

called a schedule variance.

Earned Value - Planned Costs = Schedule Variance (SV)

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Schedule variance chart
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In our example the task was planned to have accomplished $100k worth
of work in twelve months, but the real accomplishment was only $60k.
The graph shows a "behind schedule" condition. The schedule variance in
dollars would be a negative $40k, the difference between the earned
value accomplished ($60k), and the value of the planned work ($100k) to
date. According to our formula then:

$60k - $100k = ($40k)

The value earned for the work performed compared with the actual cost
incurred for the work performed (taken directly from the contractor's
accounting systems), provides an objective measure of cost efficiency.
Any difference is called a cost variance.

Earned Value - Actual Costs = Cost Variance (CV)

A negative variance means more money was spent for the work
accomplished than was planned. Conversely, a positive variance means
less money was spent for the work accomplished than was planned to be
spent.

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Cost variance chart
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From the performing organization's own accounting system, we determine

the actual costs for performing the $60K work was $110K.

When the actual costs are compared with the earned value of $60k, the
difference is the cost variance. The earned value of $60k less the actual
cost of $110k, is a negative cost variance of $50k. In this example, the
task is in an overrun condition by $50k.

$60k - $110k = ($50k)

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Analysis of these variances should reveal the factors causing the

deviation from plan.

The Task Manager uses this information in conjunction with his knowledge
of the task, to project an estimate to complete for this task. The Task
Managers analyzes variances resulting from comparisons of these five
basic data elements; planned work, work accomplished, actual costs, total
budget at completion and the estimate at completion. The work
breakdown structure provides a useful framework for summarizing this
performance information for all levels of management.

Earned value improves on the "normally used" spend plan concept

(budget versus actual incurred cost) by requiring the work in process to be
quantified. The planned value, earned value, and actual cost data
provides an objective, quantifiable measurement of performance,
enabling trend analysis and evaluation of any cost estimate at completion
within multiple levels of the project.

EVM is a valuable tool in the Project Manager's "toolbox" for gaining

valuable insight into project performance and is the tool that integrates
technical, cost, schedule and risk management. In addition, EVM provides
valuable quantifiable performance metrics for forecasting at-completion
cost and schedule for their project.

Earned Value - Planned Costs = Schedule Variance (SV)

Analysis Considerations
Favorable and unfavorable variances should be carefully evaluated. The
program analyst should examine and understand the reasons for
underruns as well as overruns because they could be masking a serious
problem. Establishing Thresholds for Reporting and Analysis

Establish threshold reporting based on risk and tailored to WBS by

specific dollar amount and/or variance percentage
Identification of threshold reporting should also consider program
phase, risk and WBS criticality

Good Variance Analysis Identifies

The Problem
Cause of the Problem
Impact to the Program (Cost, Schedule and Technical)
Corrective Action
Get well date

Areas to Address

Poor initial planning or estimating

Technical breakthroughs or problems
Cost (or usage) of labor, material, or Other Direct Costs higher or
lower than planned
Inflation and new labor contracts
Front-end loading

Reconciliation Analysis

Other budget/funding documentation

Labor resource planning documentation
Schedules

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EVM Performance Reporting - Key Data Elements
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Resources
NASA EVM Reference Card (pptx)
(/sites/default/files/atoms/files/nasa_evm_reference_card_aug_2018.pptx)

NASA EVM Reference Card (pdf)

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