earned value analysis - presentation

“PMP® Certification Readiness” Training Program

Module:Module:Earned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget Forecasting

Ravikumar Kalose N, PMP®

http://www.propmacademy.com

1ProPM Academy - 2011

"PMP® Exam Prep Course"

� Understanding –• Measurements - Subjective Vs Objective

• What is Earned Value (EV)

• Work Performance MeasurementsWork Performance Measurements

• Budget Forecasts

• Performance measurement parameters

• Various formulae and their interpretation

2ProPM Academy - 2011

"PMP® Exam Prep Course"

GreenOR Red

?

What IF…??

?

Can defend the current Project Status Assertive

Relies on assumptions, interpretations based on high level work status

Lack of any measured data and facts

Project Health (Red/Amber/Green) is debatable and subjective

Relies on measured values derived from triple constraints – Scope, Time and Cost

Project Status reported based on defined matrix

Unambiguous, No Assumptions

Easily understandable by Stakeholders

ProPM Academy - 2011 "PMP® Exam Prep Course" 3

� An objective method to measure project progress based on triple constraints (Scope, Time, Cost)

� EV measurements helps to determine if a project is on track

� EV is an indicator of current project performance

� Provides early warnings and trends on any cost, schedule over runs

Earned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value Characteristics

� Earned value indicates how much of “value” you have “earned” on the project at any given point of time.

� Helps determine variance against Planned Value (PV).


Let us consider the following example to understand the concepts better

An ERP implementation project for ABC company is estimated to cost $500,000 with an estimated duration of 40 weeks. At the end of 10 weeks the project is 20% complete with the end of 10 weeks the project is 20% complete with $150,000 being already spent on the project.

BAC =500,000, AC = 150,000

PV = 10/40*500,000 = 125,000

EV = 20/100*500,000 = 100,000


BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000

MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis

CV EV-AC -50,000 This indicates $50,000 has already been

additionally spent in excess of the project worth of

work up-to this point


SV EV-PV -25000 The negative value indicates the project is lagging

behind its planned schedule.

CPI EV/AC 0.67 A value less than 1 indicates over utilization of

funds against the actual work. In this case the

project is earning $0.67 worth value for every $

spent, not a good sign.

SPI EV/PV 0.80 A value less than 1 indicates that the project is

behind planned schedule and progress has only

been at 80% .

SVCV


MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis

EAC BAC/CPI 746,268.65 The revised estimates now for project

completion based on current performance is

$746,268.65 as against planned $500,000.

BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000

CV = -50,000 SV = -25,000 CPI = 0.67 SPI = 0.80

ETC EAC-AC 596,268.65 The project would now require $596,268.65

to complete

VAC BAC-EAC -246,268.65 There is an additional $246,268.65 required

to complete the project compared to original

estimates

TCPI (BAC-EV)/(BAC-AC)

(WORK LEFT TO

DO)/ MONEY

REMAINING)

1.14 The project need to now perform at 1.14 times

in order to stay within the estimated budget


Terminology Description Formula

Budget At Completion Budget At Completion Budget At Completion Budget At Completion

(BAC)(BAC)(BAC)(BAC)

The original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project Cost NoneNoneNoneNone

Planned Value (PV)Planned Value (PV)Planned Value (PV)Planned Value (PV) Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have

been completed” or “Authorized work for been completed” or “Authorized work for been completed” or “Authorized work for been completed” or “Authorized work for

completion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any point

PV=Planned % PV=Planned % PV=Planned % PV=Planned %

complete X BACcomplete X BACcomplete X BACcomplete X BAC

Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual % EV= Actual % EV= Actual % EV= Actual %


Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual % EV= Actual % EV= Actual % EV= Actual %

complete X BACcomplete X BACcomplete X BACcomplete X BAC

Actual Cost (AC)Actual Cost (AC)Actual Cost (AC)Actual Cost (AC) The actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of time AC= Cumulative AC= Cumulative AC= Cumulative AC= Cumulative

money spent till datemoney spent till datemoney spent till datemoney spent till date

Cost Variance (CV)Cost Variance (CV)Cost Variance (CV)Cost Variance (CV) The difference between howThe difference between howThe difference between howThe difference between how much was actually much was actually much was actually much was actually

Earned Earned Earned Earned and how muchand how muchand how muchand how much was awas awas awas actually spentctually spentctually spentctually spent

CV=EVCV=EVCV=EVCV=EV----ACACACAC

ScheduleScheduleScheduleSchedule Variance (SV)Variance (SV)Variance (SV)Variance (SV) The difference between plannedThe difference between plannedThe difference between plannedThe difference between planned schedule Vs schedule Vs schedule Vs schedule Vs

Actual ScheduleActual ScheduleActual ScheduleActual Schedule

SV = EVSV = EVSV = EVSV = EV----PVPVPVPV

TerminologyTerminologyTerminologyTerminology DescriptionDescriptionDescriptionDescription FormulaFormulaFormulaFormula

CostCostCostCost Performance Index Performance Index Performance Index Performance Index

(CPI)(CPI)(CPI)(CPI)

Indicates the projectIndicates the projectIndicates the projectIndicates the project performance for every $ performance for every $ performance for every $ performance for every $

spentspentspentspent

CPCPCPCPI = EV / ACI = EV / ACI = EV / ACI = EV / AC

Schedule PerformanceSchedule PerformanceSchedule PerformanceSchedule Performance

Index (SPI)Index (SPI)Index (SPI)Index (SPI)

Indicate actualIndicate actualIndicate actualIndicate actual schedule progress of the schedule progress of the schedule progress of the schedule progress of the

against the planned scheduleagainst the planned scheduleagainst the planned scheduleagainst the planned schedule

SPI = EV / PVSPI = EV / PVSPI = EV / PVSPI = EV / PV

Estimate At Completion Estimate At Completion Estimate At Completion Estimate At Completion

(EAC)(EAC)(EAC)(EAC)

TheTheTheThe revised project Budget for completion revised project Budget for completion revised project Budget for completion revised project Budget for completion

based on current performance indicatorsbased on current performance indicatorsbased on current performance indicatorsbased on current performance indicators

EAC = BAC / EAC = BAC / EAC = BAC / EAC = BAC /

Cumulative CPICumulative CPICumulative CPICumulative CPI

Estimate To Complete Estimate To Complete Estimate To Complete Estimate To Complete

(ETC)(ETC)(ETC)(ETC)

How much more (cost)How much more (cost)How much more (cost)How much more (cost) would be needed to would be needed to would be needed to would be needed to

complete the project based on current complete the project based on current complete the project based on current complete the project based on current

performance indicatorsperformance indicatorsperformance indicatorsperformance indicators

ETC = EAC ETC = EAC ETC = EAC ETC = EAC –––– ACACACAC

Variance At Completion Variance At Completion Variance At Completion Variance At Completion

(VAC)(VAC)(VAC)(VAC)

TheTheTheThe difference between the budgeted cost difference between the budgeted cost difference between the budgeted cost difference between the budgeted cost

and revised estimates based on current and revised estimates based on current and revised estimates based on current and revised estimates based on current

performance indicatorsperformance indicatorsperformance indicatorsperformance indicators

VAC = BAC VAC = BAC VAC = BAC VAC = BAC –––– EACEACEACEAC

ToToToTo----Complete Complete Complete Complete

Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)

ProjectProjectProjectProject Performance required to be achieved Performance required to be achieved Performance required to be achieved Performance required to be achieved

in order to stay within the original budget in order to stay within the original budget in order to stay within the original budget in order to stay within the original budget

using the remaining fundsusing the remaining fundsusing the remaining fundsusing the remaining funds

TCPI = (BACTCPI = (BACTCPI = (BACTCPI = (BAC----EV) / EV) / EV) / EV) /

(BAC(BAC(BAC(BAC----AC)AC)AC)AC)


Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : If Negative, it is below planned performance,

If Positive, it is above planned performance

If Zero, it is exactly meeting the planned performance

Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI): If the Value is less than 1, it is below planned performance

If the Value is more than 1, it is above planned performance


planned performance

If the Value is equal to 1, it is exactly meeting the planned performance

TCPI:TCPI:TCPI:TCPI: If the Value is Less than 1, it is above planned performanceIf the Value is more than 1, it is below planned performanceIf the Value is Equal to 1, it is exactly meeting the planned performance


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earned value analysis - presentation

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