Earned Value Analysis

by
John Cornman
 Introduction
• “Earned Value Analysis” is an industry
standard way to measure a project’s
progress, forecast its completion date and
final cost, and provide schedule and budget
variances along the way.
• Based on just 3 data points, it can provide
consistent, numerical indicators with which
you can evaluate and compare projects.
The 3 fundamental metrics

• Budgeted Cost of Work Performed.

• Budgeted Cost of Work Scheduled.

• Actual Cost of Work Performed.

Budgeted Cost of Work Performed
• This is the “Earned Value.”
• Abbreviated as BCWP.
• For completed work, it is the cost originally
budgeted to accomplish that work.
• “How much work was actually done?”
Budgeted Cost of Work Scheduled
• Abbreviated BCWS.
• It is the total budgeted cost up to the
analysis date.
• Approximated by the total budget
multiplied by the fraction of total project
duration at the analysis date.
• “How much work should have been done?”
 Actual Cost of Work Performed
• Abbreviated ACWP.
• What it actually cost to accomplish all the
work completed as of the analysis date.
• “What did the work that was actually done
actually cost?”
 Derived Metrics
• Schedule Variance (SV)
• Schedule Performance Index (SPI)
• Cost Variance (CV)
• Cost Performance Index (CPI)
 A Few More Acronyms
• BAC - Budget At Completion
• = Total Original Budgeted Cost
• Same as BCWS at completion
• EAC - Estimate At Completion
• = Cumulative Actuals + Estimate-To-Complete
• VAC - Variance At Completion
• = Forecast of final cost variance
 Doing The Math
• SV = BCWP - BCWS
• Negative means Behind Schedule
• SPI = BCWP / BCWS
• Less than 1.00 means Behind Schedule
• CV = BCWP - ACWP
• Negative means Over Budget
• CPI = BCWP / ACWP
• Less than 1.00 means Over Budget
• EAC = BAC / CPI
 An Example: Lemonade
• Make 1,000 cups over 50 days
• Steady rate of 20 cups per day
• Budgeted cost per cup is $0.50
• Total project budget is $500
 Lemonade Progress
• At end of day 10:
• 150 cups have been made
• Total actual cost is $90 (ACWP)
 Lemonade Status
• BCWS = $100
• 10 days x 20 cups per day x .50/cup budget
• BCWP = $75 (Earned Value)
• 150 cups x .50/cup budget
• SV = BCWP - BCWS = -$25
• SPI = BCWP / BCWS = 0.75
• CV = BCWP - ACWP = $75 - $90 = -$15
• CPI = BCWP / ACWP = 0.833
 Lemonade Forecast
• EAC = BAC / CPI = $500 / 0.833 = $600
• VAC = BAC - EAC = $500 - $600 = $100
(unfavorable)
• Schedule at Completion =
50 / SPI =
50 / 0.75 =
66.67 days
 MS Project 98 Support
No
ID Task Name BCWS BCWP ACWP SV CV EAC BAC VAC F S S
1 MS Project 98 Example $1,920.00 $840.00 $960.00 ($1,080.00) ($120.00) $2,760.00 $2,400.00 $360.00
 Five Simple Criteria for
Earned Value Applications
1.Define (scope) the project. . .with a WBS
2.Plan and schedule the project scope
3.Budget cost account plans to functions
4.Establish and maintain a performance
baseline
5.Monitor performance and forecast final
results
Fleming & Hoppleman. 1996. Earned Value Management. PMI
Earned Value Management

http://www.acq.osd.mil/pm/