track project performance - earned value management

Earned Value Management (EVM)

Measure Project Performance


Earned Value Management (EVM)Earned Value Management (EVM) is a project management methodology used to track project performance as well as forecast future performance. EVM integrates the scope baseline, schedule baseline and cost to provide performance measurements. Results can be expressed in dollars and/or percentage.

EVM can be used to report current/past project performance, and predict future project performance based on current/past performance.

Variance Analysis Forecasting

Current/Past Performance Future Performance

PART 1 - BUILDING BLOCKSEarned Value Management (EVM)


Earned Value Management (EVM)Starts with 3 building blocks that will be used in all EVM calculations.

Budgeted amount planned to be spent at a point in time of the project

Planned Value(PV)

Earned Value(EV)

Actual Cost(AC)

Measurement of completed work according to the budget at a point in time of the project lifecycle

Cost incurred for the work performed at a point in time of the project lifecycle


Earned Value Management (EVM)Scenario:You are assigned to manage a 12 month project estimated to cost $36,000 at the end of the project. Today is the end of month 3 and you are 20% complete. According to the Finance Department you have spent $7,500 to date.

Planned Value (PV)1. Calculate % Planned. 3 months / 12 months = .25 2. Calculate $ Planned. $36,000 * .25 = $9,000

Planned Value(PV)

Earned Value(EV)

Actual Cost(AC)

Earned Value (EV)1. Determine % Complete = .202. Calculate $ Earned = 36,000 * .20 = 7,000

Actual Cost (AC)1. Actual cost provided = $7,500

PART 2 - VARIANCE ANALYSISEarned Value Management (EVM)


Earned Value Management (EVM)Variance Analysis can be used to monitor project performance based on schedule and cost. Each method can be expressed in a dollar value or percentage.

Schedule Variance• Schedule Variance (SV)

Project schedule performance expressed in dollars

• Schedule Performance Index (SPI) Project schedule performance expressed in a percentage

Cost Variance• Cost Variance (CV)

Project cost performance expressed in dollars

• Cost Performance Index (CPI) Project cost performance expressed in a percentage


• Schedule Variance (SV) –Project performance expressed in dollars.SV = EV – PVSV = 7,000 – 9,000SV = (2,000)

• Schedule Performance Index (SPI) – Project performance expressed as a percent.SPI = EV / PVSPI = 7,000 / 9,000SPI = .78

Earned Value Management (EVM)Schedule Variance Analysis uses EV and PV to calculate a variance to the project schedule.

Earned Value Management

Planned Value PV $9,000

Earned Value EV $7,000

Actual Cost AC $7,500


• Cost Variance (CV) –Project performance expressed in dollars.CV = EV – ACCV = 7,000 – 7,500CV = (500)

• Cost Performance Index (CPI) – Project performance expressed as a percent.CPI = EV / ACCPI = 7,000 / 7,500CPI = .93

Earned Value Management (EVM)Cost Variance Analysis uses EV and AC to calculate a variance to the project budget (cost).

Earned Value Management

Planned Value PV $9,000

Earned Value EV $7,000

Actual Cost AC $7,500


PART 3 - FORECASTINGEarned Value Management (EVM)


Earned Value Management (EVM)We can also use EVM to forecast future project spending. Estimate at Completion (EAC) can be calculated using the 3 following methods:

Project will continue to perform at the budgeted rateEAC = AC + (BAC – EV)

Budgeted Rate

Current CPI

CurrentCPI & SPI

Project will continue to perform at the current CPI:EAC = BAC / CPI

Project will continue to perform at the current CPI & SPI:

EAC = AC + [(BAC – EV) / (CPI * SPI)]

Estimate at Completion (EAC)


Estimate at Completion (EAC) – Budgeted Rate:EAC = AC + (BAC – EV)EAC = 7,500 + (36,000 – 7,000)EAC = 7,500 + 29,000EAC = $36,500

Earned Value Management (EVM)Forecasting using Estimate at Completion (EAC) at the Budgeted rate, assumes the project will continue to perform at the currently budgeted rate.


Estimate at Completion (EAC) – Current CPIEAC = BAC / CPIEAC = 36,000 / .78EAC = $46,153.84

Earned Value Management (EVM)Forecasting using Estimate at Completion at the current CPI, assumes the project will continue to perform at the Cost Performance Index (CPI)


Estimate at Completion (EAC) – Current CPI & SPIEAC = AC + [(BAC – EV) / (CPI * SPI)]EAC = 7,500 + [(36,000 – 7,000) / (.78 * .93)]EAC = 7,500 + [29,000 / .7254]EAC = 7,500 + 39,977.94EAC = 47,477.94

Earned Value Management (EVM)Forecasting using Estimate at Completion at the current CPI & SPI, assumes the project will continue to perform at the Cost Performance Index (CPI) and Schedule Performance Index (SPI)


To Complete Performance Index (TCPI)

Based on Balance at Completion: TCPI = [(BAC – EV) / (BAC - AC)]TCPI = [(36,000 – 7,000) / (36,000 – 7,500)]TCPI = (29,000) / (28,500)TCPI = 1.01

Earned Value Management (EVM)To Complete Performance Index (TCPI) Measure of schedule performance on a project.


To Complete Performance Index (TCPI)

Based on Estimate to Complete: TCPI = (BAC - EV) / (EAC – AC)TCPI = (36,000 – 7000) / (36,500 – 7,500)TCPI = 29,000 / 29,000TCPI = 1.0

Earned Value Management (EVM)To Complete Performance Index (TCPI) Measure of schedule performance on a project.

PART 4 - PERFORMANCE REVIEWSEarned Value Management (EVM)


JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

PV 3000 6000 9000 12000 15000 18000 21000 24000 27000 30000 33000 36000

EV 3240 5400 7200 10000 13000 15000 NaN NaN NaN NaN NaN NaN

AC 3500 7000 10000 14000 17500 21000 NaN NaN NaN NaN NaN NaN

2,500

7,500

12,500

17,500

22,500

27,500

32,500

37,500

Earned Value Management (EVM)Performance Reviews

Planned Value PV

Actual CostAC

Earned Value EV

Time

Cos

t

BAC

EACForecastingVariance AnalysisStatus Date

Variance Analysis: We can graph the project performance to show the project is currently behind schedule and over budgetForecast: We can also graph the estimated future performance to show the project will exceed the budget.

APPENDIX – EVM QUICK REFERENCEEarned Value Management (EVM)


Earned Value Management – Quick ReferenceName Description Equation

Planned Value PV Budgeted amount planned to be spent Budgeted Rate * % Planned

Earned Value EV Measurement of completed work according to the budget

% Complete * BAC

Actual Cost AC Cost incurred for the work performed

Budget at Completion BAC Total Planned Value for the project

Cost Variance CV The difference in budgeted amount and actual spend at a given time.

CV = EV - PV

Schedule Variance SV The difference in Planned value and earned value indicating if the project is ahead or behind schedule

SV = EV - PV

Variance at Completion VAC The difference between the planned budget at completion and estimate to complete

VAC = BAC - EAC

Cost Performance Index CPI Measurement of Cost efficiency expressed as a percentage

CPI = EV / PV

Schedule Performance Index SPI Measurement of schedule efficiency expressed as a percentage

SPI = EV / PV

Estimate at Completion EAC Estimated cost to complete the projectBased on current CPIBased on budgeted rateBased on current CPI & SPI

EAC = BAC/CPIEAC = AC + (BAC – EV)EAC = AC + [(BAC – EV) / (CPI * SPI)]

Estimate to Complete ETC Expected cost to complete work remaining ETC = EAC - AC

To Complete Performance Index

TCPI Measurement of performance required to meet the project goals. Expressed as a percentage.

EAC = AC + [(BAC – EV) / (CPI * SPI)]TCPI = [(BAC – EV) / (BAC - AC)]

track project performance - earned value management

Business