Compiled By-Dev M EVM

EARNED
VALUE
MANAGEMENT

COMPILED BY
DEV M

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EARNED VALUE MANAGEMENT

1. Introduction

2. Earned value Management Terms

3. Eight steps to performing earned value analysis

4. EVM System

5. EVA Example

6. Conclusion

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Earned Value Management Brief

1. Introduction

Earned Value Analysis (EVA) is an industry standard method of measuring a project's progress at any given point
in time, forecasting its completion date and final cost, and analyzing variances in the schedule and budget as the
project proceeds. Earned value analysis is a method for measuring project performance. It indicates how much
of the budget should have been spent, in view of the amount of work done so far and the baseline cost for
the task, assignment, or resources.

Earned value analysis is the project management tool that is used to measure project progress. It compares the
actual work completed at any time to the original budget and schedule. It forecasts the final budget and schedule
and analyzes the path to get there. It gives you the essential early warning signal that things are going away.

It compares the planned amount of work with what has actually been completed, to determine if the cost,
schedule, and work accomplished are progressing in accordance with the plan. As work is completed, it is
considered "earned".

"Agencies must use a performance-based acquisition management system, based on ANSI/EIA Standard 748, to
measure achievement of the cost, schedule and performance goals."

EVA is a snapshot in time, which can be used as a management tool as an early warning system to detect deficient
or endangered progress. It ensures a clear definition of work prior to beginning that work. It provides an
objective measure of accomplishments, and an early and accurate picture of the contract status. It can be as
simple as tracking an elemental cost estimate breakdown as a design progresses from concept through to 100%
construction documents, or it can be calculated and tracked using a series of mathematical formulae (see below).
In either case, it provides a basis for course correction. It answers two key questions:

1. At the end of the project, is it likely that the cost will be less than, equal to or greater than the original
estimate?
2. Will the project likely be completed on time?

At the root of earned value analysis are three key values:

 The budgeted cost of individual tasks as they are scheduled in the project plan, based on the costs of
resources assigned to those tasks plus any fixed costs associated with the tasks. This is the budgeted cost
of work scheduled (BCWS). BCWS is the baseline cost up to the status date you choose. Budgeted cost
values are stored in the baseline fields, or, if you've saved multiple baselines, in Baseline1 through
Baseline10 fields.
 The actual cost required to complete all or some portion of the tasks, up to the status date. This is the actual
cost of work performed (ACWP). Normally, Microsoft Office Project 2003 correlates actual costs with actual
work.

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 The value of the work performed by the status date, measured in currency. This is literally the value earned
by the work performed, and is called the budgeted cost of work performed (BCWP). This value is calculated
for each individual task, but analyzed at an aggregate level (typically at the project level).

Earned value analysis is always specific to a status date you choose. This may be the current date, or any date
before the current date.

2. Earned Value Management Terms

Three quantities, computed from the time phased summation of planned and actual costs associated with each
work package, form the basis for cost performance measurement using Earned Value Management.

They are

1. Budgeted Cost of Work Scheduled (BCWS) or planned value,

2. Budgeted Cost of Work Performed (BCWP) or earned value,
3. Actual Cost of Work Performed (ACWP) or actual cost of accomplished work.

The above quantities are defined below and illustrated in figure 2:

Budgeted Cost of Work Scheduled (BCWS)- The sum of budgets for all work packages scheduled to be
accomplished within a given time period.

Budgeted Cost of Work Performed (BCWP)- The sum of the budgets for completed work packages and completed
portions of open work packages.

Actual Cost of Work Performed (ACWP)- The actual costs incurred in accomplishing the work performed within
a given time period. For equitable comparison, ACWP is only recorded for the work performed to date against
tasks for which a BCWP is also reported. [6]

From these three quantities we can determine

 Our total program budget

 Make a determination of schedule and cost performance
 Provide an estimated cost of the project at its completion.

Five additional terms are defined to record cost and schedule performance and program budget:

Performance Measurement Baseline (PMB)- The sum of all work packages Budgeted Cost of Work Scheduled
(BCWS) for each time period, calculated for the total program duration. The PMB forms the time-phased budget
plan against which project performance is measured.

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Budget at Completion (BAC)- The sum of all of the budgets allocated to a program. In addition to the PMB, there
generally is an amount of management reserve, which is a portion of the total program budget not allocated to
specific work packages and withheld for management control purposes. The BAC consists of the PMB plus all
management reserves.

Schedule variance (SV)- The difference between the work scheduled (BCWS) and the work actually performed
(BCWP). The schedule variance is calculated in terms of the difference in dollar value between the amount of
work that should have been completed in a given time period and the work actually completed.

Cost variance (CV)- The difference between the planned cost of work performed (BCWP) and actual cost incurred
for the work (ACWP). This is the actual dollar value by which a project is either overrunning or underrunning its
estimated cost.

Estimate at Completion (EAC)- Actual costs incurred by the project to date, plus an estimate of the costs for work
remaining. At the start of the project BAC and EAC will be equal. Only as actual costs (ACWP) vary from planned
costs (BCWP) will EAC vary from BAC. [6]

Figure 2

Cost and Schedule Variance for the project may or may not reflect the actual cost and schedule position of the
project. Some effort may be completed ahead of schedule or out of sequence, giving a false indicator of program
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well-being, particularly if the such effort represents a significant portion of the program effort. However, tracking
an individual work package or group of work packages' CV and SV can provide an indicator on how that element
is performing relative to its plan. It is this indicator which serves as the basis for the use of Earned Value
Management as part of a projects' Risk Management activities.

Work Breakdown Structure (WBS)

EVA works most effectively when it is compartmentalized, i.e. when the project is broken down into an organized
Work Breakdown Structure, or WBS. The WBS is used as the basic building block for the planning of the project.
It is a product-oriented division of project tasks that ensures the entire Scope of Work is captured and allows for
the integration of technical, schedule, and cost information. It breaks down all the work scope into appropriate
elements for planning, budgeting, scheduling, cost accounting, work authorization, progress measuring, and
management control. The two most common WBS systems are the Construction Specifications Institute (CSI)
format, and the Uniformat. Often at the preliminary stages of design the Uniform at lends a better
understanding of the cost centres, and at final bid level of documents often the CSI format is used. The indirect
costs of design, oversight, and management must be included in the WBS to reflect the full budget.

Calculating Earned Value

Earned Value Management measures progress against a baseline. It involves calculating three key values for
each activity in the WBS:

1. The Planned Value (PV), (formerly known as the budgeted cost of work scheduledor BCWS)—that portion
of the approved cost estimate planned to be spent on the given activity during a given period.
2. The Actual Cost (AC), (formerly known as the actual cost of work performed or ACWP)—the total of the
costs incurred in accomplishing work on the activity in a given period. This Actual Cost must correspond
to whatever was budgeted for the Planned Value and the Earned Value (e.g. all labor, material,
equipment, and indirect costs).
3. The Earned Value (EV), (formerly known as the budget cost of work performed or BCWP)—the value of
the work actually completed.

These three values are combined to determine at that point in time whether or not work is being accomplished
as planned. The most commonly used measures are the cost variance:

Cost Variance (CV) = EV - AC

and the schedule variance:

Schedule Variance (SV) = EV - PV

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These two values can be converted to efficiency indicators to reflect the cost and schedule performance of the
project. The most commonly used cost-efficiency indicator is the cost performance index (CPI). It is calculated
thus:

Cost performance index (CPI)= EV / AC

The sum of all individual EV budgets divided by the sum of all individual AC's is known as the cumulative CPI, and
is generally used to forecast the cost to complete a project.

The schedule performance index (SPI), calculated thus:

The schedule performance index (SPI) = EV / PV

is often used with the CPI to forecast overall project completion estimates.

A negative schedule variance (SV) calculated at a given point in time means the project
is behind schedule, while a negative cost variance (CV) means the project is over budget.

3. Eight steps to performing earned value analysis

There are two variables which the earned value method focuses on.

 Schedule (time)
 Cost
There are 8 steps to performing earned value analysis effectively. It may seem like alot at first glance, but for
small projects this takes five minutes once you learn how to do it:

1. Determine the percent complete of each task.

2. Determine Planned Value (PV).
3. Determine Earned Value (EV).
4. Obtain Actual Cost (AC).
5. Calculate Schedule Variance (SV).
6. Calculate Cost Variance (CV).
7. Calculate Other Status Indicators (SPI, CPI, EAC, ETC, and TCPI)
8. Compile Results
The first four steps represent an information gathering phase. The remaining steps are calculations which give
the project manager a glimpse into the current status of the project from a budget and schedule perspective.

Before you get started, it is important to define appropriate project status points in which this calculation is
performed. Weekly status meetings work very well for any size project, but whatever time frame is used the
important thing is to make sure these calculations are performed at that time.

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Determine Percent Complete

To start the process, the percentage complete of each task needs to be determined.

Small tasks (80 hours or less) are often best done on a 0, 50, or 100% complete basis (not started, in progress,
or complete). This brings the workload down to reasonable levels and prevents abuse when project team
members exaggerate, for example they might tell you a task is 80% complete when it is really 50% complete.

For repetitive tasks you can also use progressive measures such as number of fence posts installed.

Determine Planned Value (PV)

Planned Value, also known as Budgeted Cost of Work Scheduled (BCWS), is defined as the amount of the task
that is supposed to have been completed. It is in monetary terms as a portion of the task budget. For example
let’s say that:

 The task budget is $5,000,

 The task start date is January 1, and
 The task finish date is January 10.
If it’s January 6 today, the task is supposed to be 60% complete. Therefore, PV = $5,000 x 60% = $3,000.

Determine Earned Value (EV)

Earned Value, also known as Budgeted Cost of Work Performed (BCWP), is the amount of the task that is actually
complete. It is, again, in monetary terms as a portion of the task budget. For example, let’s use the same
example task.

 The task budget is $5,000, (same as above)

 The task start date is January 1, and (same as above)
 The task finish date is January 10. (same as above)
Let’s say the actual percent complete of the task (step 1) is 40%. Therefore, EV = $5,000 x 40% = $2,000.

Obtain Actual Cost (AC)

The Actual Cost, also known as Actual Cost of Work Performed (ACWP), as you might guess, is the actual cost of
the work. Generally employee hours need to be converted into a cost, and all project costs need to be added
up, such as the following items:

 Labor
 Materials
 Equipment
 Fixed cost items, like subcontractors
Since most projects have these well defined via accounting or project management software, we will not go into
great detail here. For the purposes of our example project let’s say the actual cost of the example task is $1,500.

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At this point the information gathering phase is complete. The following calculations represent the application
of the earned value analysis to keep your project on schedule and budget.

Calculate Schedule Variance (SV)

The Schedule Variance represents the schedule status of the project.

SV = EV – PV
In our above example the schedule variance is: SV = $2,000 – $3,000 = -$1,000.

A negative schedule variance means the task is behind schedule. A positive schedule variance means it is ahead
of schedule. The amount can be compared to worker charge out rates or similar metrics to get an idea of how
difficult it would be to recover.

Calculate Cost Variance (CV)

The Cost Variance represents the cost status of the project.

CV = EV – AC
In our above example the cost variance is: CV = $2,000 – $1,500 = $500.

A negative cost variance means the task is over budget. A positive cost variance means it is under budget.

Calculate Other Status Indicators

Although the SV and CV are the minimum requirement and work well for small projects, there are other variables
that are derived from them which you might want to calculate:

 Schedule Performance Index (SPI): The schedule variance expressed in percentage terms, for example, SPI
= 0.8 means the project 20% behind schedule.
SPI = EV / PV
 Cost Performance Index (CPI): The cost variance expressed in percentage terms, for example, CPI = 0.9
means the project is 10% over budget.
CPI = EV / AC
 Estimate at Completion (EAC): The expected budget at the end of the project given the variances that have
already taken place. There are various ways to extrapolate this value but assuming that the past variances
are likely to persist:
EAC = AC + BAC – EV
 Estimate to Complete (ETC): The expected cost to finish the rest of the project.
ETC = EAC – AC
 To Complete Performance Index (TCPI): The required CPI necessary to finish the project right on
budget. For example, TCPI = 1.25 means you need to find 25% efficiencies to finish on budget.
TCPI = (BAC – EV) / (BAC – AC)

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Compile the Results

Each metric is calculated for each individual task in the project. Therefore they need to be added up into overall
project variances to get the overall progress indicator for the project. This represents the total variance of the
project and can be reported to management, clients, and stakeholders.

The results are as instantaneous as the input data, that is, if you input the percent complete as of right now the
status reported will be as of right now as well. It’s amazing how a small variance does not cause anyone concern
until they see it as a number, and it can be corrected before it becomes more serious.

Interpreting the Results

The first two calculations (SV and CV) give you the basic indicator of project progress. A negative value indicates
an undesirable situation.

 If the schedule variance (SV) is negative, you are behind schedule.

 If the cost variance (CV) is negative, you are over budget.
The amount of the variance can be compared to the project’s budget to see how concerning it is. For example,
a variance of $1,000 on a $100,000 project is not that concerning but a $10,000 variance might need some
attention. The variances can also be compared to employee charge out rates or something similar, for example
a $1,000 variance might require a person who’s earning $50/hour to work 20 hours to recover.

In our example the schedule variance was -$1,000 and the cost variance was $500. This means that the project
is behind schedule, but it is being performed efficiently and is cost-positive. If an worker charging $75/hr was
performing the majority of this work, they are about 13 hours behind schedule (although they will finish under
budget). Thus, we know that this task requires a couple days of work over and above the regular schedule to
get it back on track.

Graphing the results over multiple status points is a very helpful exercise. Good project control often means
that the instantaneous project status snapshot is not as important as the trend the indicators are making over
time. For example, if the SV has been increasing, then maybe the project will finish on time even though it’s
behind schedule today.

It is a well understood concept that if projects fall behind early they will tend to continue falling further behind
throughout their entire life. Earned value analysis will alert you if you are even one hour behind and allow you
to take the necessary remedial action. The value of this in producing successful projects is almost without equal.

4. Earned Value Management System (EVMS)

Section A-11, Part 7 of the ANSI Standard 748 requires an EVMS to be used to comply with the Standard. A list
of guidelines is provided which covers areas such as planning, scheduling & budgeting; accounting issues;
management reports, and so forth, however there are no "approved" systems identified. But the basics of any
EVMS are:

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1. A methodical, organized, thorough, and complete WBS

2. A baseline schedule
3. A baseline budget, organized into control accounts
4. Measurement of the work by control account (e.g. $, units in place, man-hours, etc.)

Scheduling the authorized work is no different than in any large construction project—it is a necessary activity
for the success of the project. However in an EVMS the schedule will integrate all of the technical, cost, and
schedule aspects of the work, resulting in the expected sequence of work. Interdependencies are established
that result in the total work time and reveal the critical path, which is also the shortest project duration.

Within each task it is then necessary to identify objective interim measures to allow for accurate performance
assessment each month. A sufficient number of these interim measures will be defined after the detailed
schedule is established to ensure the performance is measured as accurately as possible.

A time-phased budget baseline, at the control account level, must also be established and maintained. The
assignment of budgets to work activities or tasks results in a plan against which actual performance can be
measured. This is referred to as the performance measurement baseline (PMB), and it should be established as
early as possible after notice to proceed has been issued. The PMB includes direct hours/dollars, direct material
dollars, equipment and any other direct costs, and any indirect costs for the agreed scope. The indirect costs
associated with design, oversight, and management must also be included. Essentially the PMB represents the
formal plan for the project manager to accomplish all the work required in the time allotted and within the
budget provided.

ANSI 748 also requires "On at least a monthly basis, generate schedule variance data that provide visibility into
root causes and establish actions to achieve project completion. The first intent if this criterion is to establish
the fact that analysis, to remain viable, must be accomplished on a regular, periodic basis. The second intent is
to foster analyses and identification of root cause and resulting impacts at the control account level."

The monthly performance report must include:

 Budget, earned value, and actual costs (reconcilable with accounting system)
 Cost Variance (CV)
 Schedule Variance (SV)
 Variance at Completion (VAR)
 A variance analysis narrative (root causes, impacts at completion, and management actions)

Tools and Techniques

There are several software packages available which will prepare an earned value analysis, as follows:

 Schedulemaker

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 Planisware OPX2

 RiskTrak

 Winsight

 Primavera

Earned Value Analysis - Example (Hands On)

Most people think that earned value analysis is complicated. But it’s not. In this example, I explain calculations
step choosing a sample project plan.

In reality, task level EV values will be rolled out to summary level. To provide a better understanding, I explain
the entire EV cycle with just one task. At the end of this example, you will understand how EVs are measured
for the project.

The following steps are required to get the EV values of the project plan:

 Step 1: Create project plan

 Step 2: Baseline plan
 Step 3: Update project plan
 Step 4: Set status date
 Step 5: Analyze EV values

Step 1: Create project plan

Let’s say, I have a project plan called “Baseline project”. This project contains just two tasks called “User
Interface” and “Database design”

Create the project plan with following scenario or similar. (Please note, it is not required to save this plan to
the server to demonstrate the example. You can perform all the steps of this example locally on your project
plan.)

 Estimated total duration to complete project: 10 days

 Sam and Tom are the resources working on this project
 Sam’s hourly rate is $12 per hour; Tom’s hourly rate is $8
 Estimated work: 160 hours (80 hours for User Interface task; 80 hours for Database design task)
 Sam will be working on User Interface task; Tam will be working on Database design task
 Sam and Tam will work max. 8 hours per day
 Both tasks will be start on 2/2/2009 and end on 2/13/2009

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Fig: Resource Sheet

Fig: Gantt Chart

Step 2 : Save Baseline

Steps:

 On Tools menu -> Tracking -> Save Baseline

 Click Save Baseline and the click the baseline (Ensure Baseline is the term in the Save Baseline
dropdown list and the Entire Project radio button is highlighted.)
 Press OK to save your baseline
 Save Project Plan

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Please verify the baseline information on Project Statistics window. (On Project menu -> choose Project
Information -> Click on Statistics )

Step 3 : Update project plan

Once we saved the baseline, project has been started and entered into execution phase. Now this project is
ready to track the progress.

Sam and Tom started working on their tasks and worked for 5 days and he submitted the actual work as
follows:
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Actual work done by Sam:

 2/2/2009 (Monday): 8 hours

 2/3/2009 (Tuesday): 8 hours
 2/4/2009 (Wednesday): 2 hours
 2/5/2009 (Thursday): 6 hours
 2/6/2009 (Friday): 8 hours

Total Actual Work by Sam: 32 hours

Actual work done by Tom:

 2/2/2009 (Monday): 8 hours

 2/3/2009 (Tuesday): 8 hours
 2/4/2009 (Wednesday): 8 hours
 2/5/2009 (Thursday): 8 hours
 2/6/2009 (Friday): 8 hours

Total Actual Work by Tom: 40 hours

Please update the project plan with above actuals depends on the update method you chosen; I am choosing
the Resource Usage view to update the actual hours in the project plan.

Steps:

 View -> Resource Usage view

 Make sue that time scale window shows July 15, 2007
 Enter the actual hours against task
 Save Project Plan

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Earned Value Analysis - Example (Hands On)

Step 4 : Set status date

Status Date: Status date may be current date, a date in the past, or a date in the future. Setting the status date
to the date you last updated project progress is always the best practice.

In this example, 2/6/2009 is the status date of the project. (Please refer to step 3; we received actual work till
2/6)

Steps:

 On Project menu, choose Project Information

 Select Status Date as 2/6/2009 and click OK
 Save Project Plan

Earned value calculations also based on following settings on MS Project.

 Baseline Number
 EV Calculation Method

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To get the accurate EV numbers, you need to specify the EV calculation method MS Project Plan.

Baseline Number: If you have multiple baselines saved for your project, you have a option to specify which
baseline that you want to consider for EV Calculations. In this example, we are using Baseline for
calculations.

EV Calculation Method: Earned value calculations always based on % Complete or Physical % Complete

Steps:

 Under Tools menu, choose Options

 Click on Calculation tab and Click on Earned Value
 Choose Default task Earned Value method and Baseline for Earned Value calculations from dropdown
and click OK
 Save Project Plan

Earned Value Analysis - Example (Hands On)

Step 5 : Analyze EV Values

Please verify the Gantt chart, you will be see the following values.

Analysis of Values in Gantt Chart:

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% Complete :

a)% complete of User Interface task: 45 %

% complete is always related to duration. User Interface task was originally scheduled to complete in 10 days.
Due to less actual hours done for this task by Sam, now this task is required 11 days to complete. Out of 11
days, task had been completed 5 days duration. It means, 45% of task had been completed till now.

i.e. 5 * 100/11 = 45.4545

= 45%

b)% complete of Database Design task: 50 %

Database design was originally scheduled to complete in 10 days. Out of 10 days of duration, task had been
completed 5 days duration. It means, 50% of task had been completed till now.

% Work Complete :

a)% Work complete of User Interface task: 40 %

Original estimation is 80 hours of work. Out of 80 hours of planned work; 32 hours of task actually completed.
i.e. 40 %

i.e. 100*32/80 = 40 %

b)% Work complete of Database Design task: 50 %

Original estimation is 80 hours of work. Out of 80 hours of planned work; 40 hours of task actually completed.
i.e. 50 %

To view Earned value, we have to apply the Earned value table to tracking gantt.

Steps

 On View menu -> Choose Tracking Gantt

 View -> Tables -> More Tables -> Earned Value -> Apply

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Note: Please insert additional columns as below. The following gantt is from MS Project 2007. Please look for
similar column names, if you are using MS Project 2003.

Tracking Gantt Chart will looks like below:

Please see below for explanation of EV values obtained from example:

Baseline Cost or BAC: The Baseline Cost fields show the total planned cost for a task, a resource for all assigned
tasks, or for work to be performed by a resource on a task. Baseline cost is also referred to as budget at
completion (BAC), an earned value field.

BAC for User Interface is $ 960 (i.e. total 80 hours of the task was planned at rate of $12)

BAC for Database design task is $640 (i.e. total 80 hours of the task was planned at rate of $8)

BAC for project plan is total cost of User Interface task and Database design task: $1600

BCWS: The BCWS (budgeted cost of work scheduled) fields contain the cumulative time phased baseline costs
up to the status date or today's date.

BCWS for User Interface task:

Status Date of the project: 2/9/2009

Planned Hours (Budgeted hours) for User Interface task till 2/9/2009: 40 hours

Resource assigned to User Interface task: Sam

Sam Hourly Rate: $12

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Planned Cost (Budgeted Cost) for User Interface task till 2/9/2009: 40 * 12 = $480

BCWS for Database Design task:

Status Date of the project: 2/9/2009

Planned Hours (Budgeted hours) for Database Design task till 2/9/2009: 40 hours

Resource assigned to User Interface task: Tom

Tom Hourly Rate: $8

Planned Cost (Budgeted Cost) for Database Design task till 2/9/2009: 40 * 8 = $320

BCWS for System Design task (Summary task) and project plan: $800 (i.e. $480 + $320)

BCWP:The BCWP (budgeted cost of work performed) fields contain the cumulative value of the task's,
resource's, or assignments's percent complete multiplied by the timephased baseline costs. BCWP is calculated
up to the status date or today's date. BCWP value also known as earned value.

Earned value: A measure of the cost of work performed up to the status date or current date. Earned value
uses your original cost estimates saved with a baseline and your actual work to date to show whether the
actual costs incurred are on budget.)

i.e. BCWP = % complete * Baseline Cost till Status Date

Explanation of BCWP values in above example:

User Interface task’s BCWP:

% complete till status date: 45.4545%

Baseline cost for User Interface task: $960

BCWP value = 45 % of $960

(45.4545 * 960) / 100 = $436.36

Database design task’s BCWP:

% complete till status date: 50%

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Baseline cost for Database design task: $640

BCWP value = 50 % of $640

= (50 * 640) / 100 = $320

BCWP for project plan: Cumulative cost of BCWP values of User Interface task and Database design task:
$436.36 + $320 = $756.36

ACWP: The ACWP (actual cost of work performed) fields show cost already done on a task, up to the status
date.

i.e. ACWP values actual cost incurred till status date.

Explanation of ACWP values in above example:

ACWP of User Interface task:

Actual hours done till status date: 32 hours

Resource (Sam) hourly rate : $12 Actual cost till status date: 32 * 12 = $384

ACWP of Database design task:

Actual hours done till status date: 40 hours

Resource (Tom) hourly rate : $8

Actual cost till status date: 40 * 8 = $320

ACWP for project plan is actual cost incurred: $384 + $320 = $704

Schedule Variance (SV): The SV (earned value schedule variance) field shows the difference in cost terms
between the current progress and the baseline plan of a task, all assigned tasks of a resource, or for an
assignment up to the status date or today's date.

You can use SV to check costs to determine whether tasks or assignments are on schedule.

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SV is the difference between budgeted cost of work performed (BCWP) and budgeted cost of work scheduled
(BCWS) . SV is expressed in currency units.

Microsoft Office Project calculates the SV as follows:

SV = BCWP - BCWS

 If the SV is positive, the task is currently ahead of schedule in cost terms

 If the SV is negative, the task is currently behind schedule in cost terms
 If the SV is zero, the task is on schedule in cost terms

Explanation of SV values in above example:

SV of the User Interface task: $436.36 - $480 = -$43.64

SV of the Database design task: $320 - $320 = $0

Cost Variance (CV): The CV (earned value cost variance) fields show the difference between how much it should
have cost and how much it has actually cost to achieve the current level of completion up to the status date or
today's date.

You can use CV to check whether you're under, over, or exactly within your budget for a task. You might find this
useful when assessing budgetary performance in the project to date.

CV is the difference between the task's BCWP (budgeted cost of work performed) and ACWP (actual cost of work
performed). Microsoft Office Project calculates the CV for a task as follows:

CV = BCWP – ACWP

 If the cost variance is positive, the cost for the task is currently under the budgeted, or baseline, amount,
and your actual costs are less than your baseline costs for the current level of completion on the task
 If the cost variance is negative, the cost for the assignment is currently over budget, and your actual
costs are more than your baseline costs for the current level of completion on the task

Explanation of CV values in above example:

CV of User Interface task: $436.36 - $384.00

= $52.36 (i.e. we spent less cost than planned till status date on this task.)

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CV of Database design task: $320.00 - $320.00 = $0 (i.e no cost variance found between planned and actual)

SPI: The SPI (schedule performance index) field shows the ratio of the budgeted cost of work performed to the
budgeted cost of work scheduled (BCWP/BCWS). SPI is often used to estimate the project completion date.

SPI = BCWP/BCWS

 An SPI ratio greater than 1 indicates that you're ahead of schedule

 An SPI ratio less than 1 indicates that you're behind schedule

Explanation of SPI in above example:

SPI of User Interface task: $436.36/$480.00 = 0.91

SPI of Database Design task: $320.00/$320.00 = 1

SPI of project is (0.91 + 1.00) / 2 = 0.95

CPI: The CPI (cost performance index) fields show the ratio of budgeted (or baseline) costs of work performed
to actual costs of work performed, up to the project status date or today's date.

CPI is the ratio of BCWP (budgeted cost of work performed) to ACWP (actual cost of work performed)

CPI = BCWP / ACWP This value indicates whether you are over or under budget as of the status date.

 An CPI ratio greater than 1 indicates that you're under budgeted

 An CPI ratio less than 1 indicates that you're over budgeted

Explanation of CPI in above example:

CPI of User Interface task: $436.36/$384.00 = 1.14

CPI of Database design task: $320/00/$320.00 = 1.00

CPI for Project is average values of User Interface task and Database design task: (1.14 + 1.00)/2 = 1.07

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EAC: The EAC (estimate at completion) field shows the expected total cost of a task based on performance up
to the status date. EAC is also called forecast at completion (FAC).

EAC = ACWP + (Baseline cost - BCWP) / CPI

Explanation of EAC values in above example:

EAC for User Interface task: $384 + ($960 - $436.36)/1.14

= $384 + $523.64/1.14

= $384 + $453.33333

= $844.81

TCPI : The TCPI (to complete performance index) field shows the ratio of the work remaining to be done to
funds remaining to be spent, as of the status date.

TCPI = (BAC - BCWP) / (BAC - ACWP)

A TCPI value greater than 1 indicates a need for increased performance for the remaining work of the project
in order to stay within budget (so you may need to give up some quality).

An TCPI value less than 1 indicates performance can decrease to stay within budget, thus creating
opportunities to increase quality or profit.

Explanation of TCPI values in above example:

TCPI for User Interface task:

($960.00 - $436.36)/($960.00 - $384.00)

523.64/576.00 =0.90909722

TCPI for Project is average values of User Interface task and Database design task: (0.90909722 + 1.00)/2 =
0.94

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5. CONCLUSION:-
Every project needs to manage schedule, cost or scope requirements and restrictions. Earned Value
Management is a comprehensive yet not over-sophisticated methodology that allows project managers to
measure and monitor the performance of a project.

Thereby, the Earned Value Analysis focuses on the measurement of cost and value. The Variance Analysis
assesses the differences between the project baseline(s) and the actual performance. Forecasting is used to
estimate the future performance of a project and identify the areas of improvement. Trend analysis, on the
other hand, refers mainly to the development of variances over different periods.

EVM helps provide the basis to assess work progress against a baseline plan, relates technical, time and cost
performance, provides data for pro-active management action and provides managers with a summary of
effective decision making.

EVM significantly affects the way a project's scope of work is defined and budgeted. To a lesser extent, EVM
affects how a project is scheduled. The main reason is EVM requires a bottom-up approach to defining the full
scope of work by using a "deliverable-oriented" WBS focused on end products.

The 8 Steps to Earned Value Analysis

1. Determine the percent complete of each task.

2. Determine Planned Value (PV).
3. Determine Earned Value (EV).
4. Obtain Actual Cost (AC).
5. Calculate Schedule Variance (SV).
6. Calculate Cost Variance (CV).
7. Calculate Other Status Indicators (SPI, CPI, EAC, ETC, and TCPI)
8. Compile Results.

Earned Value Management (EVM) helps project managers to measure project performance. It is a systematic
project management process used to find variances in projects based on the comparison of worked
performed and work planned. EVM is used on the cost and schedule control and can be very useful in project
forecasting.

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