Earned Value Management 4/3/2011

Earned Value Analysis

Concepts

Earned Value Management

Earned Value Analysis

“The rabbit wouldn’t have lost the race if someone

informed about its performance time to time…”
From old story of Rabbit & Tortoise

PMP Prep Course 1

Earned Value Management 4/3/2011

Earned Value Analysis

WHAT IS EVA?
EVA is basically a methodology to track
1. Project Schedule Performance
2. Project Cost Performance
3. Project Progress

Earned Value Analysis

 Project Schedule Performance
- to measure project schedule
performance and determine time to
complete project
- i.e. measuring what is completed to date
what is expected to complete

PMP Prep Course 2

Earned Value Management 4/3/2011

Earned Value Analysis

 Project Cost Performance

- to measure how much is spent against what
is expected to be spent

Earned Value Analysis

Benefits of EVA
1. For project managers
• Reliable project costs and schedule data for
more effective decision making
• The relationship between cost, schedule and
work achieved
• Ability to avoid last-minute “surprises”
• Early identification of potential problems
• Accurate prediction of project costs at
completion

PMP Prep Course 3

Earned Value Management 4/3/2011

Earned Value Analysis

Benefits of EVA
2. Provide ability to answer
◦ What did we get for money spent
◦ How much will the project cost to
complete
◦ When will the project be complete
◦ Which activities are contributing to the
cost overrun
◦ Which resources contributing to the
schedule slippage

Earned Value Analysis

Planned Value (PV)
Planned Value (PV). PV tells you what you plan to
do.
Planned Value = Physical Work + Approved
Budget
PV, also known as Budgeted Cost of Work
Scheduled (BCWS)
PV is categorized as:
Cumulative PV is the sum of the approved budget
for activities scheduled to be performed to date.
Current PV is the approved budget for activities
scheduled to be performed during a given period.

PMP Prep Course 4

Earned Value Management 4/3/2011

Earned Value Analysis

PV example
We are working on a Client/Server project, and part of
the scope is for Software Design. The time frame is 5
months and the budget for this scope is $15,000,
resulting in a budget of $3,000 per month.
Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

What is current and cumulative PV? As on today

Earned Value Analysis

The Cumulative PV is the total for the elapsed months:
January – March. The cumulative PV is $9,000.
The Current PV is the budget for the current month,
March, and equals $3,000.
Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

As on today

PMP Prep Course 5

Earned Value Management 4/3/2011

Earned Value Analysis

Budget at Completion (BAC)
BAC is the sum of all budgets allocated to a
project scope.
◦ BAC can be obtained by work packages
◦ The Project BAC must always equal the Project
Total PV.
◦ If they are not equal, your earned value calculations
and analysis will be inaccurate.

Earned Value Analysis

What is the BAC for this project if Software Design is
the complete scope of the project?
Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

As on today
•Yes, BAC = $15,000. And, in keeping with the previous
points about BAC
•The project BAC equals the Project Total PV.
•The Earned Value calculations are correct.

PMP Prep Course 6

Earned Value Management 4/3/2011

Earned Value Analysis

Actual Cost (AC)
Actual Cost (AC), also called actual
expenditures, is the cost incurred for
executing work on a project..
AC is also called Actual Cost of Work
Performed (ACWP).
Cumulative AC is the sum of the actual cost
for activities performed to date.
Current AC is the actual costs of activities
performed during a given period.

Earned Value Analysis

Cumulative AC is the sum of the actual cost for
activities performed to date, and Current AC is the
actual costs of activities performed during a given
period.
Client/Server project – Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 1200 1500

As on today
•The Cumulative AC is the total for the elapsed months: January –
March. The Cumulative AC is $3,800.
•The Current AC is the actual cost for the current month, March,
and equals $1,500.

PMP Prep Course 7

Earned Value Management 4/3/2011

Earned Value Analysis

Earned Value (EV)
EV is the quantification of the “worth” of the work
done to date.
EV tells us, in physical terms, what the project has
accomplished.
Cumulative EV is the sum of the budget for the
activities accomplished to date.
Current EV is the sum of the budget for the activities
accomplished in a given period.

Earned Value Analysis

Earned Value example
Client/Server project – Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 1200 1500
EV 900 1000 1200 As on today

• The Current EV is the sum of the budget for the activities

accomplished in the current month, March, and equals $1,200.
• The Cumulative EV is the sum of the budget for the activities
accomplished to date: January – March. The cumulative EV is
therefore $3,100.

PMP Prep Course 8

Earned Value Management 4/3/2011

Earned Value Analysis

Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 1200 1500
EV 900 1000 1200 As on today

Cum PV = $9,000 Current PV = $3,000 BAC = $15,000

Cum AC = $3,800 Current AC = $1,500
Cum EV = $3,100 Current EV = $1,200

Earned Value Analysis

Budget At
Completion
Actual Cost (BAC)
(AC)
Planned Value
(PV)

Earned Value
(EV)

As On Date

PMP Prep Course 9

Earned Value Management 4/3/2011

Earned Value Analysis

 Schedule Variance (SV) = (BCWP – BCWS)
 = (EV – PV)
◦ A comparison of amount of work performed during a
given period of time to what was scheduled to be
performed.
◦ A negative variance means the project is behind
schedule
 Cost Variance (CV) = (BCWP – ACWP)
 = (EV – AC)
◦ A comparison of the budgeted cost of work
performed with actual cost.
◦ A negative variance means the project is over
budget.

Earned Value Analysis

 Schedule Performance Index (SPI)
 SPI=BCWP/BCWS = EV/PV
 SPI<1 means project is behind schedule

 Cost Performance Index (CPI)

 CPI= BCWP/ACWP = EV/AC
 CPI<1 means project is over budget
 Cost Schedule Index (CSI)

PMP Prep Course 10

Earned Value Management 4/3/2011

Earned Value Analysis

 CSI=CPI x SPI
 CSI <1, the project is over budget and behind
schedule
 Estimate At Completion (EAC)
 EAC = BAC/CPI
 Estimate to Complete (ETC)
 ETC = EAC – BAC

Earned Value Analysis

 To-Complete Performance Index (TCPI)
 Is calculated projection of cost performance,
must be achieved on the remaining work
 That is ratio between remaining work and
funds remaining
 TCPI = (BAC-EV)/(BAC-AC)

PMP Prep Course 11

Earned Value Management 4/3/2011

Earned Value Analysis

A $10,000 software project is scheduled
for 4 weeks.
At the end of the third week, the project is
50% complete and the actual costs to
date is $9,000
Planned Value (PV) = $7,500
Earned Value (EV) = $5,000
Actual Cost (AC) = $9,000

Earned Value Analysis

 Schedule Variance
= EV – PV = $5,000 – $7,500 = - $2,500
 Schedule Performance Index (SPI)
= EV/PV = $5,000 / $7,500 = 0.66
 Cost Variance
= EV – AC = $5,000 - $9,000 = - $4,000
 Cost Performance Index (CPI)
= EV/AC = $5,000 / $9,000 = 0.55
The metrics indicate the project is behind schedule
and over budget.
 On-target projects have an SPI and CPI of 1 or
greater

PMP Prep Course 12

Earned Value Management 4/3/2011

Earned Value Analysis

 If the project continues at the current
performance, what is the true cost of the
project?
 Estimate At Complete
= Budget At Complete (BAC) / CPI
= $10,000 / 0.55 = $18,181
At the end of the project, the total project
costs will be $18,181

Earned Value Analysis

Formulas to recap:

SCHEDULE COST
SV = EV – PV CV = EV – AC
SV = BCWP – BCWS CV = BCWP – ACWP

SPI = EV / PV CPI = EV / AC
SPE = BCWP / BCWS CPI = BCWP / ACWP

CSI = CPI * SPI EAC = BAC / CPI

TCPI = (BAC-EV)/(BAC-AC) ETC = EAC - BAC

PMP Prep Course 13

Earned Value Management 4/3/2011

Questions ?

PMP Prep Course 14