1

3.3 Understanding Earned

Value Analysis(EVA)
 How is project health measured?
 Project Manager evaluates project’s triple constraint
of scope, time and cost
 Key Questions
– Is the project performing to budget?
– Is the project on schedule to deliver the agreed
scope?
 Typically Summarize Project Health using Green,
Yellow, Red Status (Traffic Light Reporting)
CONT’D….

 Earned value analysis in its various forms is the most

commonly used method of performance measurement.

 Earned Value Analysis is an objective method to measure
project performance in terms of scope, time and cost
 integrates scope, cost (or resource), and schedule measures to
help the project management team assess project performance.
 Use EVA metrics are used to measure project health and
project performance
4
Earned Value Characteristics

Point in Time Evaluation

How much work did you PLAN to complete? (Planned Value)

How much work did you ACTUALLY complete? (Earned Value)

How much did you spend to complete the work? (Actual Cost)
EVA involves in calculating the following key values for each activities :-

1. Planned Value (PV)

 Also known as Budgeted Cost of Work Scheduled (BCWS)
 Is the amount of the task that is supposed to have been completed, in terms of the
task budget.
 is that portion of the approved cost estimate planned to be spent on the activity
during a given period.

PV = Percent Complete (planned) x Task Budget

2. Earned Value (EV)

Also known as Budgeted Cost of Work Performed (BCWP)

Is the amount of the task that is actually completed

EV = Percent Complete (actual) x Task Budget
6
Cont’d………
3. Actual Cost (AC)
 Also known as Actual Cost of Work Performed (ACWP)
 Is the actual to-date cost of the task
 is the total of costs incurred in accomplishing work on the
activity during a given period.
4. Schedule Variance (SV)
 tells the amount that the task is ahead or behind schedule

SV = EV – PV or
If SV is negative, the task is behind schedule.
SV = BCWP-BCWS
If SV is zero, the task is on schedule.
If SV is positive, the task is ahead of schedule.
7
 Cont’d……

5. Schedule Performance Index (SPI)

 Similar to the SV, also indicates ahead or behind schedule
 Gives the project manager a sense of the relative amount of the
variance.

SPI = EV/PV or
If SPI < 1, the task is behind schedule
SPI= BCWP/BCWS
If SPI = 1, the task is on schedule
If SPI > 1, the task is ahead of schedule

8
 Cont’d…...
6. Cost Variance (CV)
 Similar to the schedule variance, the Cost Variance tells the
project manager how far the task is over or under budget.

CV = EV – AC or
If CV is negative, the task is over budget
CV = BCWP - ACWP
If CV is zero, the project is on budget
If CV is positive, the project is under budget

9
Cont’d….

7. Cost Performance Index (CPI)

 Similar to the CV, also indicates over or under budget

 Gives the project manager a sense of the relative amount of the

variance.

CPI = EV/AC or
If CPI < 1, the task is over budget
CPI = BCWP/ACWP
If CPI = 1, the task is on budget
If CPI > 1, the task is under budget

10
 Cont’d…..

8. Budget at Completion (BAC)

 It is simply the total project budget, which is the aggregate of
all of the task budgets.

BAC = Project Budget

11
Cont’d…

9. Estimate at Completion (EAC)

 This value tells the project manager what the overall project
budget will be if everything else went according to plan
 It is the extrapolation of the current project status to the end of
the project

EAC = BAC/CPI
EAC = AC + [(BAC – EV)/(SPI x CPI)]
EAC = AC + ETC

12
 Cont’d….
10. Estimate to Complete (ETC)
 This value tells the project manager how much money must be
spent from this point forward, to complete the project
 Sometimes the project assumptions have changed and a new
estimate must be produced instead of old performance metrics
assumed.
 The project is expected to continue with the same performance
in the future as the past. ETC = EAC – AC
ETC = new estimate
13
 Cont’d…..

11. Variance at Completion (VAC)

 This value tells the project manager the forecasted cost variance
(CV) at the completion of the project.
   It is the extrapolation of the current project status, using the EAC
method chosen.

If VAC is negative, you need that much more money to

VAC = BAC – EAC
complete the project.
If VAC is positive, you will finish the project with that
much of a surplus.
14
 Cont’d….
12. To Complete Performance Index (TCPI)

 Tells the project manager what CPI would be necessary to finish the project on

budget

 It gives an indication of how much efficiency needs to be found in the

remainder of the project to make up for past negative variances.

 If the project is required to finish within the original budget:

TCPI = (BAC – EV) / (BAC – AC)

 If the project budget is flexible to accommodate the past variance :

TCPI = (BAC – EV) / (EAC – AC)

 TCPI < 1 = under budget

 TCPI > 1 = over budget
15
 Earned Value Analysis formulas

Cost Variance (CV) = BCWP - ACWP

Schedule Variance (SV) = BCWP - BCWS

Cost Performance Index (CPI) = BCWP / ACWP

Schedule Performance Index (SPI)= BCWP / BCWS

Estimate to Completion (ETC) = (BAC -BCWP) / CPI

Estimate at Completion (EAC) = ACWP + ETC

16
The Comparison between planned and earned values provides
work accomplishment or project performance in terms of cost and
time variances

Schedule Performance Cost Performance Index R

Index A
T
I
O

BCWS BCWP ACWP

V
A
R
I
Schedule Cost Variance
A
Variance
N
C
E 17
Earned value analysis (EVA)
Example Problem 1
Compute Estimate At Completion (EAC) and Variance At
Completion (VAC) if both SPI and CPI influence the project work
when given variables are:-
Budget At Completion (BAC) = $22,000
Earned Value (EV) = $13,000
Planned Value (PV) = $14,000
Actual Cost (AC) = $15,000

18
Example Problem 2

 For the following project calculate SV,CV, SPI and CPI at the
end of second month.
Month 1 2 3 4

Planned value(PV) 1,110,000 600,000 2,500,000 800,000

Earned value(EV) 1,000,000 750,000

Actual cost(AC) 1,250,000 500,000

19
Example Problem 3

• You are managing a project which is into six months

of its execution. You are now reviewing the project
status and you have ascertained that project is behind
schedule. The actual cost of Activity A is 2,00,000
and that of Activity B is  1,00,000. The planned value
of these activities are 1,80,000 and 80,000
respectively. The Activity A is 100% complete.
However, Activity B is only 75% complete. Calculate
the schedule performance index(SPI) and cost
performance index (CPI) of the project on the review
date.

20
Problem Example 4
 The following bar chart shows the activities to complete a project in six
months (each cell represents 1 month). The total project cost is $1,480.

Activity Cost Month 1 Month 2 Month 3 Month 4 Month 5 Month 6

A $100
B $200
C $60
D $80
E $40
F $150
G $300
H $100
H $50
J $400

21
Cont’d…..
After 3 months, Activities A, B, C, E, D and
half of F are completed, for a cost of$490.
What is the status of the project in terms of the
budget (over or under) and the schedule (ahead or
behind)? (Give each answer in terms of a percent
variance)

22
 Problem Example 5
• The following depicts a one-year schedule for a project.
Activity Cost Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
A $50
B $120
C $80
D $200
E $120
F $300
G $60
H $70
J $50
K $60

23
 Cont’d…..

• After three months on the job (July 1), the contractor concluded
that 20% of Activity F , Activities A, B, and D was 100 %
completed, 80% of Activity C was completed, and 40% of
Activity E was completed. The project has cost the contractor a
total of $535.For this project, using earned value concepts
 determine the schedule variance and the cost variance. State if
the project is over or under budget and if it is ahead of or
behind
schedule.
24
Problem example 6
You are building a 4-sided fence. Each side is of equal length and
you estimate that each side will contain the same material and labor
costs as well as take the same amount of time to complete. You
estimate that the project will take 4 days to complete and your
budget, including a contingency reserve is $4,000.
At the end of 3 days, you are asked to prepare an Earned Value
calculation in order to determine how the project is progressing. You
determine that as of the end of day 3, total costs incurred are $3,500.
and 70% of the project is completed.
Determine :-
1. ACWP, BCWP, BCWS, CV, CPI, SV, SPI, EAC, BAC, VAC &
ETC
2. Status of the project

25
Problem example 7

Your project is tasked with excavation of 1,000,000

cubic feet of soil. According to the project management
plan you need to excavate 60,000 cubic feet of soil per
week at a cost of $5 per cubic feet. According to the
first month’s progress report the project’s EV was
1,000,000 and the AC was 1,200,000. According to the
second month’s progress report the project’s EV was
2,200,000 and the AC was 4,400,000. After the 3rd
month (12 weeks) you have 250,000 cubic feet of soil
remaining to be excavated and you total cost to date is
4,000,000. Determine the current values for each of the
terms AC, EV, PV, CV, CPI, SV, SPI, EAC, BAC ,VAC
& ETC
26
 Problem example 8
You are the Program Manager managing the construction of a new airport. Five
project managers are directly reporting to you. Each project manager is
assigned a part of the total scope of works to be executed independently. The
total duration allowed to complete all works is 24 months and the total
approved budget is $10,000,000.
At the end of the first year, you should have completed $6,000,000 worth of
work but the project is only 50% complete. Actual costs reported by each
project manager for the first year are:
 Project manager 1: $200,000
 Project manager 2: $1,200,000
 Project manager 3: $1,800,000
 Project manager 4: $500,000
 Project manager 5: $900,000
Determine the current values for the entire program for each of the terms AC,
EV, PV, CV, CPI, SV, SPI, EAC, BAC ,VAC & ETC

27