Earned Value Management System

EARNED VALUE
MANAGEMENT
SYSTEM
By
R.RADHAKRISH B.E., M.B.A
NAN
Contact No: +91 9940613809

email: pmcachennai@gmail.com 1
www.pmcachennai.com
EVMS and EV
EARNED VALUE MANAGEMENT SYSTEM
EVM System is used to evaluate the project progress status in Scope, Time and
Cost
Management and combines measurements of project scope, schedule and cost
performance within a single integrated methodology.
EARNED VALUE
The financial value of work performed by or with a resource up to the Data

date.
Primavera calculates earned value as the product of the percent complete and the budget.
Earned value is also known as the Budgeted Cost for Work Performed (BCWP)
A measure of cost of work performed up to the Status date or Current date. Earned value
uses
our original cost estimates saved with a baseline and our actual work to date to show
whether
the actual costs incurred are on budget.
Contact No: +91 9940613809
www.pmcachennai.com
EVMS - Introduction
Schedule and Cost Management are the most essential parts of

project lifecycle management and many projects fail as a result of
not managing these critical components effectively.
The most common technique used for Cost management is Earned
Value Management (EVM)
A project management technique used for measuring project
progress in an objective manner that combines measurements of
project scope, schedule and cost performance within a single
integrated methodology.
EVM is becoming the standard across for this purpose in both the
private and public sector and many organizations are now adopting
this technique to manage their projects.
In the public sector, EVM is mandated for all government projects in
the United States and many other countries are following suit.
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EVMS – Introduction continues….
The most basic cost control technique is to develop a project budget

and then track spending against it. On a small project, this can be
as simple as having a target cost goal for the total project.
We could monitor project costs and sound the alarm if the percent
of dollars spent exceeds the percent completion estimated for the
project.
We could also prepare a time-phased budget, breaking the over all
budget goal into intervals of weeks, months, quarters or years. This
can provide a budget baseline for tracking actual costs against
periodic budget targets.
When the cumulative budget of estimated estimated project costs are
plotted graphically over time, they usually result in the shape which is
sometimes called an S Curve, since it looks like an inclined “S”
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Project cost and schedule performance measurements should

be really managed as integrated elements and not as
separate entities. If our budget spend plan shows us over
spending and our schedule shows milestones slipping we can
know we may be trouble, but we will have no way to make a
quantitative assessment of how bad the trouble is.
EVMS solves this problem by providing an accurate picture of
spending and accomplishments related to a baseline plan.
This enables you to quickly form conclusions about the
projects teams staffing levels and productivity as well as
giving insight into areas of the WB where the problems are
occurring. S
Contact No: +91 9940613809

www.pmcachennai.com
Earned Value Management (EVM) provides for consistent and

documented discipline in project management.
EVM allows for insight into the details of the baseline plan and
technical and financial performance against this baseline plan.
the
EVM is implemented through an EVM System (EVMS). The goal

of an EVMS is to effectively integrate the work scope of a
program with the schedule and cost elements for optimum
program planning and control
The primary purpose of the EVMS is to support program

management.
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www.pmcachennai.com
THE SEVEN PRINCIPLES OF AN “EVMS”
The seven principles of an EVMS are

1. Plan all work scope for the program to completion
2. Breakdown the program work scope into finite
pieces that can be assigned to a responsible
person or organization for control of technical,
3. schedule
Integrate and cost objectives
program work scope, schedule and cost objectives into a
performance measurement baseline plan against which accomplishments
may be measured. Control changes to the baseline.
4. Use actual cost incurred and recorded in accomplishing the work
performed
5. Objectively assess accomplishments at the work performance level
6. Analyse significant variances from the plan, forecast impacts and
prepare an estimate at completion based on performance to date
and work to be performed.
7. Use EVMS information in the company's management processes.
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EARNED VALUE
ANALYSIS
An advanced method to check the overall project

performance in terms of Schedule and Cost
(Schedule Performance Index and Cost
Performance Index) and Forecasting
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EARNED VALUE MANAGEMENT - Example
Project Duration / Span: 4 Days
Project Budget: USD 4000 (BAC)
Day-1 Day-2 Day-3 Day-4

1000 1000 1000 1000
Planned Value, PV (or) Budgeted Cost for Work Scheduled, BCWS

PLANNED VALUE: This is the physical/actual work scheduled plus
authorized budget to accomplish the scheduled work
the
PV = Budget at Completion x Planned % Complete.
Planned Value = Budget x Target %
Complete
This is the cost of the work that should have been achieved by the
date, had the project progressed according to the target plan. data
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PLANNED VALUE, ACTUAL COST AND
EARNED VALUE COST
Actual Cost (AC): Total costs incurred that must
relate to whatever cost
was budgeted within the planned value and earned
value ( which can be
sometimes direct labour hours alone, direct costs alone, or all costs
Earned Value (EV): Earned Value Cost is the portion of the budgeted
including indirect costs)
(or) planned total work
in accomplishing cost during
of the activity
a giventhattimeisperiod.
actually completed as of the
project data date.
Computed as Earned Value Cost = Budget at Completion x Performance % Complete .
The method for computing the performance percent complete depends on
the earned value technique selected for the activity’s WBS
The physical work accomplished plus the authorized budget for this work.
The sum of the approved cost estimates (may include overhead allocation)
for activities (or portion of activities) completed during a given period
(usually project-to-date) for an activity or group of activity.
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E V M- Example Continues…..
EARNED VALUE and ACTUAL COST

Earned Value, EV (or) Budgeted Cost for Work Performed,
BCWP
The financial value of work performed by or with a resource up to the Data
Primavera calculates earned value as the product of the percent complete and the
date.
budget. Earned value is also known as the Budgeted Cost for Work Performed.
A measure of the cost of work performed up to the status date or current date.
Earned
value uses our original cost estimate saved with a baseline and our actual work
to date
to show whether
Earned the actual
Value costs incurred
= Performance are on budget
% Complete x Budget at Completion
On day-1, 75% work only completed. Expenditures should be USD 750

Actual Cost, AC (or) Actual Cost for Work Performed, ACWP
The costs actually incurred for the work accomplished up to the Data date. The cost
the work is independent of the value of the work. The cost is also independent of the
of
planned cost for accomplishing that work.
Actual cost for 75% work completion is USD 900/-
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www.pmcachennai.com
Performance Report: As on Day 1

Schedule Variance (SV):
The difference between Earned Value and Planned Value/ Effort.
Primavera calculates schedule variance as the difference between
Budgeted Cost for Work Scheduled (BCWS) and Budgeted Cost
for
Work Performed
If the BCWP (BCWP).
is greater than the BCWS, Schedule is positive
variance
(favourable)
Schedule variance = Earned Value Cost – Planned Value Cost
as on day 1 = BCWP – BCWS
= 750 - 1000 = - 250
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www.pmcachennai.com
Schedule Performance Index (SPI)

The schedule efficiency ratio of “earned value”
accomplished against the “planned value”.
The SPI describes what portion of the planned schedule
was actually accomplished.
SPI = EV divided by PV
Earned Value is divided by Planned Value
To 75% work completion, 750 / 1000 = 0.75
For example, If 100% achieved, 1000/1000 = 1
If 110% achieved, 1100/1000 = 1.1
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Cost Variance (CV)

Any difference between the budgeted costs of an activity and the actual cost of
that activity.
The difference between Earned Value and Actual Cost
= Earned Value – Actual Cost
= 750 – 900
= -150
For example If Earned Value and Actual Cost are both are same, Value is 750 - 750 = 0
Cost Performance Index
The cost efficiency ratio of earned value to actual cost.
CPI is often used to predict the magnitude of a possible cost overrun using the
following formula: BAI / CPI = projected cost at completion.
CPI = EV divided by AC
750 / 900 = 0.83
For example if Actual Cost is USD 740 to 75% work completion ,
750 / 740 = 1.01 under budget.
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Cost Schedule Index

SPI x CPI = 0.75 x 0.83 = 0.62
The closer the CSI is to 1, the more likely the projects can be
improved
/ recovered from its deviation (nonconformity) to the original baseline.
On Schedule Beyond Schedule Ahead Schedule

If SV 0 - ive + ive
If SPI 1 Less than 1 More than 1
Within budget Over budget Under budget

If CV 0 - ive + ive
If CPI 1 Less than 1 More than 1
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www.pmcachennai.com
Estimate at Completion (EAC)

How much do we require at completion of the project
The expected total cost of an activity, a group of activities or
the
project when the defined scope of work has been completed.
Most techniques for forecasting EAC include some adjusting of
the original cost estimate, based on actual performance to date.
Estimate to Complete (ETC)
How much do we need to complete the remaining/balance project
The expected additional cost needed to complete an activity, a
group of activities, or the project. Most techniques for forecasting
ETC include some adjustment to the original estimate based on
project performance to date.
Contact No: +91 9940613809
www.pmcachennai.com
Estimate at Completion (EAC)

How much do we require at End (or) Completion of the project
BAC / CPI
4000/0.83 = USD 4819/- (It will extend USD 4,819)
Estimate to Complete (ETC)
How much do we need money to complete the remaining
/balance project
EAC – AC = 4819-900 = USD 3919/-
Variance at Completion (VAC)
BAC – EAC = 4000-4819 = USD -819/-
Contact No: +91 9940613809

www.pmcachennai.com

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EARNED VALUE

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