EARNED VALUE MANAGEMENT

(EVM)

IntroductionEVM is a project management technique which measures the progress of a project by combining technical performance, schedule performance, and cost performance.

Work AccomplishedSchedule Budget

IntroductionEVM compares PLANNED work to COMPLETED work to determine if work accomplished, cost, and schedule are progressing as planned.

The amount of work actually completed and resources actually consumed at a certain point in a project

TOThe amount of work planned (budgeted) to be completed and resources planned to be consumed at that same point in the project

Key DefinitionsBudgeted Cost of Work Scheduled (BCWS) The cost of the work scheduled or planned to be completed in a certain time period per the plan. This is also called the PLANNED VALUE.

Budgeted Cost of Work Performed (BCWP) The budgeted cost of the work done up to a defined point in the project. This is called the EARNED VALUE.

Actual Cost of Work Performed (ACWP) The actual cost of work up to a defined point in the project.

Variance FormulasSchedule Variance:

SV = BCWP - BCWSSchedule Performance Index:

SPI = BCWP / BCWSCost Variance:

CV = BCWP - ACWPCost Performance Index:

CPI = BCWP / ACWP

ResultsSV, CV = 0 Project On Budget and Schedule

SV, CV < 0 Over Budget and Behind Schedule

SV, CV > 0 Under Budget and Ahead of Schedule

CPI, SPI = 1 Project On Budget and Schedule

CPI, SPI < 1 Over Budget and Behind Schedule

CPI, SPI > 1 Under Budget and Ahead of Schedule

ExampleProject description:

We are supposed to build 10 units of equipmentWe are supposed to complete the project within 6 weeksWe estimated that 600 man-hours to complete all the unitsIt costs us $10/hour to build the equipment

ExampleProject status:

Week 34 units of equipment completed400 man-hours spent

How are we doing?Are we ahead or behind schedule?Are we under or over budget?

ExampleAccomplished Work: 4/10 = %40 complete

BCWP = (600 man-hours*$10/hour)*(4/10 units)

= $2400

Schedule: 3/6 = %50 over BCWS = (600 man-hours*$10/hour)*(3/6 weeks)

= $3000

Budget: 400/600 = %67 spentACWP = 400 man-hours*$10/hour = $4000

ExampleSV = BCWP – BCWS = $2400 - $3000 = -$600

SV is negative; we are behind scheduleCV = BCWP – ACWP = $2400 - $4000

= -$1600CV is negative; we are over budget

SPI = BCWP / BCWS = $2400 / $3000 = 0.8SPI is less than 1; we are behind schedule

CPI = BCWP / ACWP = $2400 / $4000 = 0.6CPI is less than 1; we are over budget

PROJECT PERFORMANCE PREDICTIONS

Earned Value analysis results are used to predict the future performance of the project

NOTE: There are various names in the literature.Budget At Completion (BAC) = The total budget (PV or BCWS) at the end of the project. If a project has Management Reserve (MR), it is typically added to the BAC.Amount expended to date (AC)Estimated cost To Complete (ETC)

ETC = (BAC – EV) / CPIEstimated cost At Completion (EAC)

EAC = ETC + AC