Project Management in the dark…

• Project
• planned duration: 12 mos
• total budget: £100K
• .
• Status
• time elapsed: 6 mos
• spend so far: £64K
• .
• How far along are you?
• 50%? 64%?
• How are you doing?
Project Mgt in the dark
• It tells you how much you’ve spent
and compares it to the budget.
• Does it give an accurate picture of
£
where you are on the project? NO!
It doesn’t tell you if...
– you’re ahead or behind schedule
– you’re over or underspent
– you’ve spent money on the right
thing
– you’re getting value for money

time – your problems are over or only

just begun
• What’s missing?
What’s missing?
- knowing how much has been accomplished
£

• Accomplishment is (planned)
work that has been carried
out successfully.
• The budgeted cost of that
work quantifies the
accomplishment.
• This is called ‘earned value’

time
A bit more light…
• Project
• planned duration: 12 mos
• total budget: £100K
• produce 20 units
• Status
• time elapsed: 6 mos
• spend so far: £64K
• units produced: 8 complete, 2 partial
• How far along are you?
• 50%? 64%? >40%?
• How are you doing?
Basic definitions – answer three basic Q’s
• How much work • Budgeted Cost for Work
should be done? Scheduled (BCWS)
• plan
• schedule
• budget
• How much work is • Budgeted Cost for Work
done? Performed (BCWP)
• accomplishment
• How much did it cost? • Earned Value (EV)
• Actual Cost of Work
Performed (ACWP)
• actuals
Variance
£ • CV (Cost Variance)
– BCWP - ACWP
– earned value - actual cost
CV • SV (Schedule Variance)
SV – BCWP - BCWS
– earned value - planned
value
– 0 once all work completed
time
Performance Indices • CPI (Cost Performance
Index)
1.1
– BCWP/ACWP
1.0
– earned/actual
0.9

0.8 – the one to use…

CPI
• SPI (Schedule
1.1
Performance Index)
– BCWP/BCWS
1.0

0.9
– earned/planned
SPI
0.8
– of diminishing value as
project progresses…
tends to 1
More definitions
– answering Q’s about the total job
• What was the total job • Budget At Completion (BAC)
supposed to cost?
• What do we now expect • Estimate To Completion (ETC)
will be needed to finish
the job? • Estimate At Completion (EAC)
• EAC = ACWP + ETC
• What do we now expect • often referred to as Latest
the total job to cost? Revised Estimate (LRE)
• How much do we now • VAC (Variance At Completion)
expect to eventually • VAC = BAC - EAC
underspend/overspend?
Earned Value Management tells you...
Where it’s Drill down
Know where you are
going right through the
and where it’s data to where
in terms of Where you the problem is
accomplishment going wrong
as well as how much
really are!
you’ve spent
EVM

Know the final cost How much When to ask

and delivery date it’s really Informed
the tough decision making
with confidence going to cost
questions
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)

10
Earned Value: Example
Actual Cost: what you Today
have actually spent to
this point in time.
Cost (Person-Hours)

Planned Value: what your

plan called for sending on
the tasks planned to be
completed by this date.

Earned Value: value (cost)

of what you have
accomplished to date, per
the base plan.

Time (Date)

11
Earned Value: Example
Today

Over
Cost (Person-Hours)
Budget

Behind
Schedule

Time (Date)

12
Performance Indices
• Cost Performance Index
• CPI = BCWP/ACWP
• Schedule Performance Index
• SPI = BCWP/BCWS
• Analysis
• CPI > 1.0 → exceptional performance
• CPI < 1.0 → poor performance
• Similar for SPI

13
Earned Value Management Systems measure
progress
Progress = Movement Forward

to measure progress,
there must be a standard
against which the forward
movement may be
compared

EVMS establishes a baseline

to measure progress

15
EVM can provide answers to the
following questions:
• How much have we spent?
• How much did we get for our money?
• How much more will be have to spend to complete the
tasks we wanted to accomplish?
• How much longer will it take?
• How efficiently is the work being done?
• What has happened? (Why are we off schedule/cost?)
• What is happening? (What are the impacts?)
• What is going to happen? (What are we doing to fix it?)
16
Five Basic Elements
BCWS Budgeted Cost of Work Scheduled

BCWP Budgeted Cost of Work Performed

ACWP Actual Cost of Work Performed

BAC Budget at Completion

EAC Estimate at Completion

17
 5 Basic Performance Data
Questions & Answers
QUESTION ANSWER ACRONYM

How much work should Budgeted Cost for BCWS

be done? Work Scheduled

How much work is done? Budgeted Cost for BCWP

Work Performed

How much did the is done Actual Cost of ACWP

work cost? Work Performed

What was the total job Budget at Completion BAC

supposed to cost?

What do we now expect the Estimate at Completion EAC

total job to cost?
18
Variance Summary
• The difference between the BCWP and the ACWP is called a
cost variance

• The difference between the BCWP and BCWS is called schedule

variance and is provided in terms of dollars

19
Budget at Completion (BAC)
BAC

$
$
$ $
$
$
$
time

• when all work has been phased, cumulative BCWS = BAC

20
Formulas
• Cost variance • Cost variance in
BCWP – ACWP percentage
BCWP – ACWP x 100
BCWP

• Schedule variance in
• Schedule variance percent
BCWP – BCWS BCWP – BCWS x 100
BCWS

Negative variance = cost overrun or behind schedule

Positive variance = cost underrun or ahead of schedule

21
Trend Analysis
Cost Performance Index (CPI) measure of cost efficiency

CPI = Value of Work Completed (BCWP)

Cost of Work Completed (ACWP)

Schedule Performance Index (SPI) measure of schedule efficiency

SPI = Value of Work Completed (BCWP)
Value of Work Planned (BCWS)

Closer to “1” the better

Less than 1 = overrun (CPI); behind schedule (SPI)
Greater than 1 = underrun (CPI); ahead of schedule (SPI)
22
 Performance Efficiencies
• DO I THINK THE CONTRACTOR WILL COME IN ON
BUDGET?

COST PERFORMANCE INDEX: WORK

= ACCOMPLISHED
CPI = cost efficiency for work performed to date ACTUALS
WORK for each dollar spent)
(The value of work accomplished
BCWP ACCOMPLISHED $1500
= ACWP = ACTUAL = $2250 = .67
COST

WORK
SCHEDULE PERFORMANCE INDEX: = ACCOMPLISHED
WORK
SPI = schedule efficiency with which work has been SCHEDULED
WORK
accomplished
BCWP ACCOMPLISHED $1500
(The rate at which work is being accomplished)
= BCWS = WORK = $2000 = .75
SCHEDULED 23
Budget at Complete (BAC), Estimate at Complete (EAC)
and Variance at Complete (VAC)
Schedule
BAC = Sum of BCWS
Delay
(Planned cost of all work) EAC
VAC
BAC = $5,000
BAC
EAC(kr)* = ACWP plus estimated to ETC
complete (ETC)
(Actual cost to date plus expected cost
to finish all work) $

EAC = $7,000

VAC = BAC-EAC
VAC = $5,000-$7,000
VAC = -$2,000
TIME
* EAC(kr) = Contractor EAC 24
 How to answer the question: “Have we
done what we said we’d do?”

• % complete estimating % of
Budget spent % of work done
% of time elapsed
• subjective, incomplete

• draws false conclusions

25
 EVA Integrates All Three

• It compares the PLANNED amount of work with

what has actually been COMPLETED, to determine
if COST , SCHEDULE, and WORK ACCOMPLISHED are
progressing as planned.

• Work is “Earned” or credited as it is completed.

26
PV – Planned Value or Budgeted Cost of Work
Scheduled

120000

100000

80000

60000 BCWS

40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03

Aug-03
Sep-03

Dec-03
Mar-03
Apr-03
May-03

Oct-03
27
 Earned Value Definitions (cont.)

AC: “Actual Cost of Work Performed”

Cost incurred to accomplish the work that has been done to date.

28
 ACWP - Actual Cost of Work Performed

120000

100000

80000
56000 BCWP
60000
ACWP
49000
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03

Aug-03
Sep-03

Dec-03
Mar-03
Apr-03
May-03

Oct-03
29
 Earned Value Definitions (cont.)

•EV: Earned value or Budgeted Cost of Work

Performed

The planned (not actual) cost to complete the work that

has been done.

30
 EV- Earned Value or Budgeted Cost of Work
Performed

120000

100000

80000
55000 BCWP
60000
49000 BCWS
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03

Aug-03
Sep-03

Dec-03
Mar-03
Apr-03
May-03

Oct-03
31
 The Whole Story

120000

100000

80000
56000 BCWS
60000 BCWP
55000
49000 ACWP
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03

Apr-03
May-03

Aug-03
Sep-03

Dec-03
Oct-03
Mar-03

32
 Some Derived Metrics

•SV: Schedule Variance (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

•CV: Cost Variance (EV-AC)

• A comparison of the budgeted cost of work performed
with actual cost.
• A negative variance means the project is over budget.

33
 Schedule Variance & Cost Variance

Schedule Variance = EV-PV

$49,000
- 55,000
SV = - $ 6,000

Cost Variance = EV-AC

$49,000
56,000
CV = - $7,000

34
 Some More Derived Metrics

•SPI: Schedule Performance Index SPI=EV/PV

• If SPI<1 means project is behind schedule

•CPI: Cost Performance Index CPI= EV/AC

•If CPI<1 means project is over budget

•CSI: Cost Schedule Index (CSI=CPI x SPI)

The further CSI is from 1.0, the less likely project recovery
becomes.

35
 Performance Metrics

SPI: EV/PV
49,000/55,000 = 0.891

CPI: EV/AC
49,000/56000 = 0.875

CSI: SPI x CPI

.891 x .875 = 0.780

36
 Making Projections
120000
103865
100000 102000
90882
80000
Today BCWS
60000 BCWP
ACWP
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03

Apr-03
May-03

Aug-03
Sep-03

Dec-03
Oct-03
Mar-03

37
 Estimate to Complete

140000
120000 116,571

100000 102000
Today BCWS
80000
BCWP
60000
ACWP
40000
20000
0

3
3

03

03

04
3
-03

v-0
l-0
n-0

n-0
ar-

p-

ar-
ay

Ju

No
Se
Ja

Ja
M

M
M

38
 Shortcomings of Earned Value

• Quantifying/measuring work progress can be

difficult.

• Time required for data measurement, input, and

manipulation can be considerable.

39
 EVM Trend Analysis: Cumulative
At Complete
Time Now Risk Variance

Prog
Budget
Management Reserve

ACWP
Schedule Slip
Resources

(Actual
Cost)

Cost BCWS
400 Variance (Planned
Value)
BCWP Schedule
(Earned Variance
300
Value)

200

100

Time
▲
J F M A M J J A
Approx. Time Variance
Planned Resource Consumption
Program
Budget $M
40
Management Reserve
35

30

25
Resources

20 BCWS
(Planned Value)
15 Time-Phased Plan
for Consumption
10 of Resources

5 Typical “S” Curve

▲
J F M A M J J A S O N D
Time
 Unfavorable Cost Performance
At Complete
Variance
Time Now
Prog
Budget
Management Reserve

ACWP
$ Resources

(Actual
Cost)

Cost BCWS
400 Variance (Planned
Value)
BCWP
(Earned
300
Value)

200

100

Time
▲
J F M A M J J A