topic 6a earned value management

8/15/2019 Topic 6a Earned Value Management

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TOPIC 6aEARNED VALUE

MANAGEMENT (EVM)

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EARNED VALUE MANAGEMENT

• Is the best project control technique for early detection ofperformance variances.

• The technique was developed nearly 40 years ago for theUnited States government to better manage contract

payments to vendors.• ver since! it has grown in popularity and acceptance

across many industries! and now is regarded as thepreferred project control technique by "#I.

• $owever! it has not been accepted as standard practice in

all industries! and it is usually a technique found inorgani%ations or industries that are relatively mature intheir management processes.

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• Assess cost performance and sced!"e performance to#eter

– The main value of is that it allows you to measure and trac' bothschedule and cost performance together. valuating project performanceon just one of these indicators DOE$ NOT always give you the true pictureand does not allow you to detect variances as early.

• Eac %or& pac&a#e as a p"anned 'a"!e

– The planned value of any wor' pac'age is the budgeted cost of the wor'scheduled ()*+S, to complete the wor' pac'age. The important pointhere- stimate the cost of each wor' pac'age in your schedule. lso! thismeans that the project as a whole has a baseline schedule and budget.

• At an pont* te pro+ect as an ,earned, 'a"!e

– The earned value of a project is the budgeted cost of the wor' actually

completed ()*+",. In other words! how many wor' pac'ages (or partialwor' pac'ages, have been completed at this time/ The value is epressedin budgeted cost terms! not actual costs. This allows you to perform costanalysis by comparing budgeted versus actual costs for the wor'completed (*+",.

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I1T23U*TI31 T3 21 &5US6ST# (&S,

• The &S is used to monitor the progress of wor' andcompare accomplished wor' with planned wor'.

• There are several factors in the earned value report that

needs to be 'nown in order to use it e7ectively.

• The factors are the- – )udgeted cost of wor' scheduled ()*+S,

– )udgeted cost of wor' performed ()*+",

– ctual cost of wor' performed (*+",

• These three elements form the basis for the earned valuereporting system.

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8UI&51T T2#S

• )udgeted cost of wor' scheduled (-C.$)9"lanned &alue (PV)

• )udgeted cost of wor' performed (-C.P)9arned &alue (EV)

• ctual cost of wor' performed (AC.P)9 ctual *ost (AC)

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• ta'es the planned value ("&,! or what you planned todo at an estimated cost! and compares it against theestimated cost of the wor' performed (&, and against theactual cost of wor' performed (*,! or what actually gotdone.

• These metrics provides information about whether theproject tas's are ta'ing longer than they should (sced!"e'arance* or $V,! or whether they are actually requiringmore wor' e7ort to complete (cost 'arance* or CV,.

• In addition! the estimate:at:completion metric (*, helpsyou forecast ;nal project performance and determine if anycorrective action needs to ta'e place.

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-!d#eted cost of %or& sced!"ed (-C.$)

• Is the amount of money that wasplanned! or budgeted! at each timeperiod in the project.

• It is determined by cost loading the*"# diagram to determine thedistribution of cost in accordance with

the project plan.• The S:curve for a project represents

the )*+S.

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Act!a" cost of %or& performed (AC.P)

• The *+" is the actual amount ofmoney that has been spent at anypoint in time during the project.

• It is determined from accountingrecords or the responsible party that'eeps records of actual ependiture

of money.

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-!d#eted cost of %or& performed(-C.P)

• The )*+" is the amount of moneyearned based on the wor' that hasbeen completed.

• It is determined by m!"tp"n# tepercenta#e of wor' completed bythe budgeted amount for the wor'.

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+hat could you conclude fromthe ;gure below/

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"roject trac'ingwithout

• !

the project is signi;cantly over budget and behind schedule. method is needed to measure technical performance objectivelyand quantitatively! and that is what EVM accomplishes.

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"roject trac'ing with

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8uestion

• Suppose a project is in progress and as of today theplanned ependitures for the project were to have beenEF00!000. Suppose also that there were ;ve tas's and thetas's had budgets of EC0!000! E=00!000! EAF0!000!E=00!000! and EA0!000! respectively. The actual cost ofeach of the tas's that were wor'ed on was E==!000!E=A0!000! EAC0!000! E=0F!000! and EA0!000. Tas's =! A! C!and 4 are complete.

• +hat are the )*+S! *+"! and )*+" ("&! *! and &,/

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nswer

• )*+S is EF00!000.

• *+" is E4>?!000.

• )*+" is E4>0!000.

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&ariances G Indices

&ariances-• CV 9 )*+" D *+" (*ost variance9arned:ctual,• $V 9 )*+" D )*+S (Schedule variance9arned:"lanned,

Indices-• CPI9()*+"H *+",

*ost "erformance Inde9(arnedH ctual,

*ost variance related as a ratio instead of a dollar amount.

ratio less than =.0 indicates that the value of the wor' that has beenaccomplished is less than the amount of money spent.

• $PI9()*+"H )*+S,Schedule "erformance Inde9(arnedH"lanned,

Schedule variance related as a ratio instead of a dollar amount. ratio less than =.0 indicates that wor' is being completed slower thanplanned.

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&ariances G Indices

• 2atios are used in the earned value system to predict thecost to complete a project.

• The CPI is used to predict the magnitude of a possible costoverrun or under run. It adjusts the budget based on pastperformance.

• The $PI is used to predict the magnitude of a possible timeadvance or delay. It adjusts the schedule based on pastperformance.

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• In the schedule below! "roject has a *"I greater than =.00. Thisshows us that the project has been earning value faster than it hasbeen accruing costs.

• $owever! "roject also has a S"I value that is less than =.00.lthough ctual *osts are low! Tas' = is behind schedule! so the

project has not earned as much value as was planned.

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L#"5 = (8,

• "rovide an earned value analysis to evaluate the progressof the sewer and water lines project. The original budget is2#=4B! F00 and the project is scheduled to be completed inM4 wor'ing days. status report after =0 wor'ing days intothe project includes the following information- – ctivity =0! =00@ complete as scheduled! actual cost92#=! F00

– ctivity A0! =00@ complete as scheduled! actual cost92#A! A00

– ctivity C0! =00@ complete as scheduled! actual cost92#4! 000

– )*+"92#B! ?00

– *+"92#B! B00

– )*+S92#B! ?00 – )*92#=4B! F00

– The )*+S and )*+" shown above are the same values as shown onthe tenth wor'ing day because activity =0! A0 and C0 were allcompleted according to the original planned schedule.

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L#"5 = (,

• Cost and schedule deviations:

– *ost variance! *&9)*+":*+" 9 2#B! ?00:2#B! B00

9 :2# =00

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A negative value of CV represents a cost

overrun. Based on te status report te a!tual

!ost is greater tan earned "# $% 100.


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L#"5 = (,

– Schedule variance! S& 9)*+":)*+S

9 2#B! ?00:2#B! ?00

9 0

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&in!e te &V is 'ero( te pro)e!t is progressing as

planned. *e pro)e!t is not aead of or "eind te

planned s!edule.


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L#"5 = (,

• Cost and schedule performance: – *ost "erformance Inde! *"I9()*+"H*+",

9 (2#B! ?00H2#B! B00,

9 0.M>B

The *"I is less than =.0! which indicates a poor costperformance. The earned value is less than the actual costs.

– Schedule "erformance Inde! S"I9()*+"H )*+S,

9 (2#B! ?00H 2#B! ?00,

9 =.0

The S"I equals to =.0! which indicates the schedule performanceis progressing precisely as planned.

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L#"5 = (,

• Forecasting cost at completion – stimate to complete! T*9()*:)*+",H *"IJ

9 (=4B! F00:B! ?00,H0.M>BJ

9 2#=4=! B4C)ased on the analysis of the statues report! the remaining cost

to complete the project is 2#=4=! B4C.

– stimate at completion! *9*+" K T*

9 B! B00 K =4=! B4C

9 2# =4M! 44C

)ased on the analysis of the status report! the estimated costof the project at completion is 2#=4M! 44C! which is 2#=!M4C over the original budget of 2#=4B! F00.

Check EAC = 147,500/0.97 = !AC / C"# = 149,44$ % Scenario 1& prev'ous var'ances are e(pected to cont'nue )or the rest o) the pro*ect+

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form!"a

=, & 9 arned &alue nalysis

A, 9 arned &alue #anagement

C, )*+S ()udgeted cost of wor' scheduled, 9 "& ("lanned &alue,..Ne.g.amount stated in tender sum H contract amount

4, )*+" ()udgeted cost of wor' performed, 9 & (arned &alue,N..actualvalue of wor' completed to date

F, *+" (ctual cost of wor' performed, 9 * (ctual *ost,N..cannot obtain

from any document other than actual amount spent.

?, *& (*ost variance, 9 )*+" D *+" (arned D ctual,

B, S& (Schedule variance , 9 )*+" D )*+S (arned D "lanned,>, *"I (*ost "erformance Inde, 9 )*+"H *+". It indicates cost overrun or

under run. If *"IO= means project is over budgetM, S"I (Schedule "erformance Inde, 9 )*+" H )*+S. It indicates the projects

is ahead or behind the schedule. If S"IO= means project is behind schedule

=0,*&@ (cost variance percent, 9 (*& H )*+", P =00==,S&@ (schedule variance percent, 9 (S& H )*+S, P =00=A,*SI- *ost Schedule Inde (*SI9*"I S"I,. The further *SI is from =.0! the

less li'ely project recovery becomes.

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Some de;nition and formula=C,)* ()udget at completion, 9 3riginal project estimate

=4,T* (stimate to complete, 9 (-AC 1 -C.P) 2 CPI3 (scenaro 4) T* 9

estimate of the cost of the remaining wor' on the project (tas',=F,* (stimate at completion, 9 *+" K T*. * 9 comprise of the

cumulative to date the actual cost of wor' performed plus the estimate tocomplete the remaining wor'. It is the project managerQs estimate of whatthe ;nal cost of the project (tas', will be.

=?,&* (&ariance t *ompletion, 9


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* and T*


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* and T*Scenario C::c!rrent 'arances are atpca"

variances occurred are typical and are not epected to occur in the future costvariance occurred is an isolated event! it is not a trend. Thus T* is the originalestimate for the remaining wor' which is unchanged.

ETC9 5 -AC 1 EV

* 9 * K T*C (ctual to date plus remaining budget,

Scenario 4::c!rrent 'arances are tpca"* acce"erate to comp"ete pro+ect ontme

there is a need to complete the project on time! accelerate the remaining tas's willcost money therefore the remaining wor' is divided by the S"I. The estimate for theremaining wor' is based upon the Scenario = approach of considering any over:run orunder:run trend.

ETC: 5 (-AC EV) 2 (CPI ; $PI)

* 9 * K T*4

•E'ther method 's personal *udment call -ased upon the'r understand'n o) the pro*ect

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! !(eample,

+or' )rea'down Structure(+)S,

)*+S *+" @ of )*+S ()8, )*+"

="reliminaries (lump sum, =B!A>0 =?!4B0 =00 =B!A>0 site clearence

Site set up

mobili%ation

Aarth wor'

cavation B!A00 B!4B0 =00 B!A00

arth ;ling B!A00 B!AM0 =00 B!A00

arth disposal B!A00 B!AM0 =00 B!A00

CSubstructure "iling wor's F!400 C!M?0 =00 F!400

"ile cap =!440 >=0 =00 =!440


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8A

)ase on the S:*urve of )*+S! )+*" and *+". Identify the following elements on wee'C! +ee' 4 and wee' >. *omment on the data. Remem/er tat te are c!m!"at'edata3

=,)*+S

A,)*+"

C,*+"

4,*&F,S&

?,*"I

B,S"I

>,*&@

M,S&@

=0,*SI

=C,)*

=4,T* (stimate to complete, 9 (-AC 1 -C.P) 2 CPI3 (scenaro 4)

=F,* (stimate at completion,

=?,&* (&ariance t *ompletion,

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8A+ee' )*+SH"& )*+"H& *+"H*

0 0 0 0

= =!000 =!F00 =!>00

A A!F00 C!000 C!F00

C 4!F00 F!?00 ?!000

4 ?!000 B!F00 B!000

F =0!000 =C!000 ==!CA0

? =4!000 =B!000 =F!F00

B AC!000 A0!000 AF!4F0> C0!000 A>!000 CA!=F0

M C>!000 CF!000 4C!=?0

=0 4>!000 4F!000 4?!?B0

== ?0!000 FC!000 FF!??0

=A BA!000 ?>!F00 B0!000

=C >?!000 >>!000 >A!F00

=4 =0=!000 =0F!000 MF!000

=F =A0!000 =AF!000 ==B!F00

=? =F?!000 =F0!000 =40!000

=B =B=!C00 =?F!000 =F4!000

=> =BF!F00 =BA!000 =?>!000

=M =>A!000 =>C!000 =>?!000

A0 =>F!000 =>F!000 =M0!000

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ample 8A

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l 8A


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ample 8A

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ample 8A


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ample 8A

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ample 8A


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ample 8A

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ample 8A


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ample 8A)ase on the S:*urve of )*+S! )+*" and *+". Identify the following elements on wee'

C! +ee' 4 and wee' >. *omment on the data. 2emember that they are cumulative data.

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wee' C wee'4 wee'>=,)*+S

=,)*+"

=,*+"

=,*&

=,S&

=,*"I

=,S"I

=,*&@

=,S&@

=,*SI

=C,)*

=C,T*

=C,*

=C,&*

comment -

=,

A,

C,


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wee' C wee'4 wee'>

=,)*+S A!000 =!F00 B!000

A,)*+" A!?00 =!M00 >!000

C,*+" A!F00 =!000 ?!B00

4,*& =00 M00 =!C00

F,S& ?00 400 =!000

?,*"I

=.04 =.M0 =.=M*"IY=! *3ST"23Z*T IS U12

)UWTB,S"I

=.C0 =.AB =.=4S"I Y=! "23Z*T IS $ 3<S*$U5

>,*&@ C.>F 4B.CB =?.AF

M,S&@ C0.00 A?.?B =4.AM

=0,*SI =.CF A.4= =.C?

=C,)* =>F!000 =>F!000 =>F!000

=4,T* =BFC>4.?A M?C?>.4A =4>ACB.F0 2#I1I1W *3ST T3 *3#"5T

=F,* =BB!>>4.?A MB!C?>.4A =F4!MCB.F0 T$ "23Z*T IS STI55 U12 T$32IWI15 *3ST

=?,&* B!==F.C> >B!?C=.F> C0!0?A.F0

comment -

=,

A,

C,

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Some eample

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arned &alue- ample

3n ay L-

• "511 &5U"511 &5U ()udgeted cost of the wor' scheduled! )*+S, 9

=> K =0 K =? K ? 9 F0

• 21 &5U21 &5U ()udgeted cost of the wor' performed! )*+", 9

=> K > K =4 K 0 9 40

• *TU5 *3ST*TU5 *3ST (of the wor' performed ! *+", 9

4F (from your project trac'ing : not evident in above chart,

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Today


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arned &alue- ample

C o s t ( P e r s o

n - H o u r s )

Time (Date)

Planned ValuePlanned Value+ ,at #our

plan !alled for sending on te

tas-s planned to "e !opleted

"# tis date.

Today

Earned ValueEarned Value+ value /!ost

of ,at #ou ave

a!!oplised to date( per te "ase plan.

Actual CostActual Cost+ ,at #ou

ave a!tuall# spent to tis

point in tie.

B u d g e

t e d / 1 l a n

n e d 0 &

p e n d i n

g

B u d g e

t e d / 1 l a n

n e d 0 &

p e n d i n

g

A ! t u

a l & p

e n d i n

g

A ! t u a

l & p e

n d i n g

2 a r n e d

V a l u e

2 a r n e d

V a l u e


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arned &alue- ample

C o s t ( P e r s o

n - H o u r s )

Time (Date)

Today

B u d g e

t e d / 1 l a n

n e d 0 &

p e n d i n

g

B u d g e

t e d / 1 l a n

n e d 0 &

p e n d i n

g

A ! t u

a l & p

e n d i n

g

A ! t u a

l & p e

n d i n g

2 a r n e d

V a l u e

2 a r n e d

V a l u e BeindBeind

&!edule&!edule

verver

BudgetBudget

d & l G & i


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arned &alue G &ariance-ample

3n ay L-

• "511 &5U ()*+S, 9 => K =0 K =? K ? 9 F0

• 21 &5U ()*+", 9 => K > K =4 K 0 9 40

• *TU5 *3ST (*+", 9 4F (from your project trac'ing,

Therefore-• Schedule &arianceSchedule &ariance 9 )*+" D )*+S 9 40 : F0 9 :=0 (behind schedule,

• Schedule "erformance IndeSchedule "erformance Inde 9 40 H F0 9 0.>! or >0@ of plan (a ):! at best,

• *ost &ariance*ost &ariance 9 )*+" : *+" 9 40 : 4F 9 :F

• *ost "erformance Inde*ost "erformance Inde 9 40H4F 9 .>M! or youQre getting an >M[ return onevery E=.00 (or! person:hour, spent on this project

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topic 6a earned value management

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