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Earned Value Management 4/3/2011
PMP Prep Course 1
Earned Value Management
Earned Value Analysis
Concepts
Earned Value Analysis
“The rabbit wouldn’t have lost the race if someone
informed about its performance time to time…”
From old story of Rabbit & Tortoise
Earned Value Management 4/3/2011
PMP Prep Course 2
Earned Value Analysis
WHAT IS EVA?
EVA is basically a methodology to track
1. Project Schedule Performance
2. Project Cost Performance
3. Project Progress
Earned Value Analysis
Project Schedule Performance
- to measure project schedule
performance and determine time to
complete project
- i.e. measuring what is completed to date
what is expected to complete
Earned Value Management 4/3/2011
PMP Prep Course 3
Earned Value Analysis
Project Cost Performance
- to measure how much is spent against what
is expected to be spent
Earned Value Analysis
Benefits of EVA
1. For project managers• Reliable project costs and schedule data for
more effective decision making
• The relationship between cost, schedule and work achieved
• Ability to avoid last-minute “surprises”
• Early identification of potential problems
• Accurate prediction of project costs at completion
Earned Value Management 4/3/2011
PMP Prep Course 4
Earned Value Analysis
Benefits of EVA
2. Provide ability to answer ◦ What did we get for money spent
◦ How much will the project cost to complete
◦ When will the project be complete
◦ Which activities are contributing to the cost overrun
◦ Which resources contributing to the schedule slippage
Earned Value Analysis
Planned Value (PV)Planned Value (PV). PV tells you what you plan to
do. Planned Value = Physical Work + Approved
BudgetPV, also known as Budgeted Cost of Work
Scheduled (BCWS)PV is categorized as:
Cumulative PV is the sum of the approved budget for activities scheduled to be performed to date.
Current PV is the approved budget for activities scheduled to be performed during a given period.
Earned Value Management 4/3/2011
PMP Prep Course 5
Earned Value AnalysisPV example
We are working on a Client/Server project, and part of the scope is for Software Design. The time frame is 5 months and the budget for this scope is $15,000,
resulting in a budget of $3,000 per month.
What is current and cumulative PV?
Dollars
Client/Server project – Software Design
JAN
3000
FEB
3000
MAR
3000
APR
3000
MAY
3000PV
As on today
Earned Value Analysis
The Cumulative PV is the total for the elapsed months:
January – March. The cumulative PV is $9,000.
The Current PV is the budget for the current month,
March, and equals $3,000.
Dollars
Client/Server project – Software Design
JAN
3000
FEB
3000
MAR
3000
APR
3000
MAY
3000PV
As on today
Earned Value Management 4/3/2011
PMP Prep Course 6
Earned Value Analysis
Budget at Completion (BAC)
BAC is the sum of all budgets allocated to a
project scope.
◦ BAC can be obtained by work packages
◦ The Project BAC must always equal the Project
Total PV.
◦ If they are not equal, your earned value calculations
and analysis will be inaccurate.
Earned Value Analysis
What is the BAC for this project if Software Design is the complete scope of the project?
•Yes, BAC = $15,000. And, in keeping with the previous points about BAC
•The project BAC equals the Project Total PV.
•The Earned Value calculations are correct.
Dollars
Client/Server project – Software Design
JAN
3000
FEB
3000
MAR
3000
APR
3000
MAY
3000PV
As on today
Earned Value Management 4/3/2011
PMP Prep Course 7
Earned Value Analysis
Actual Cost (AC)
Actual Cost (AC), also called actual expenditures, is the cost incurred for executing work on a project..
AC is also called Actual Cost of Work Performed (ACWP).
Cumulative AC is the sum of the actual cost for activities performed to date.
Current AC is the actual costs of activities performed during a given period.
Earned Value Analysis
Cumulative AC is the sum of the actual cost for activities performed to date, and Current AC is the actual costs of activities performed during a given period.
•The Cumulative AC is the total for the elapsed months: January –
March. The Cumulative AC is $3,800.
•The Current AC is the actual cost for the current month, March,
and equals $1,500.
Dollars
Client/Server project – Software Design
JAN
3000
1100
FEB
3000
1200
MAR
3000
1500
APR
3000
MAY
3000PV
AC
As on today
Earned Value Management 4/3/2011
PMP Prep Course 8
Earned Value Analysis
Earned Value (EV)
EV is the quantification of the “worth” of the work done to date.
EV tells us, in physical terms, what the project has accomplished.
Cumulative EV is the sum of the budget for the activities accomplished to date.
Current EV is the sum of the budget for the activities
accomplished in a given period.
Earned Value Analysis
Earned Value example
• The Current EV is the sum of the budget for the activities accomplished in the current month, March, and equals $1,200.
• The Cumulative EV is the sum of the budget for the activities accomplished to date: January – March. The cumulative EV is therefore $3,100.
Dollars
Client/Server project – Software Design
JAN
3000
1100
900
FEB
3000
1200
1000
MAR
3000
1500
1200
APR
3000
MAY
3000PV
AC
EV As on today
Earned Value Management 4/3/2011
PMP Prep Course 9
Earned Value Analysis
Cum PV = $9,000 Current PV = $3,000 BAC = $15,000
Cum AC = $3,800 Current AC = $1,500
Cum EV = $3,100 Current EV = $1,200
Dollars
Client/Server project – Software Design
JAN
3000
1100
900
FEB
3000
1200
1000
MAR
3000
1500
1200
APR
3000
MAY
3000PV
AC
EV As on today
Earned Value Analysis
Actual Cost
(AC)
Earned Value
(EV)
Planned Value
(PV)
Budget At
Completion
(BAC)
As On Date
Earned Value Management 4/3/2011
PMP Prep Course 10
Earned Value Analysis Schedule Variance (SV) = (BCWP – BCWS)
= (EV – PV)◦ A comparison of amount of work performed during a
given period of time to what was scheduled to be performed.
◦ A negative variance means the project is behind schedule
Cost Variance (CV) = (BCWP – ACWP)
= (EV – AC)◦ A comparison of the budgeted cost of work
performed with actual cost.
◦ A negative variance means the project is over budget.
Earned Value Analysis
Schedule Performance Index (SPI)
SPI=BCWP/BCWS = EV/PV
SPI<1 means project is behind schedule
Cost Performance Index (CPI)
CPI= BCWP/ACWP = EV/AC
CPI<1 means project is over budget
Cost Schedule Index (CSI)
Earned Value Management 4/3/2011
PMP Prep Course 11
Earned Value Analysis
CSI=CPI x SPI
CSI <1, the project is over budget and behind
schedule
Estimate At Completion (EAC)
EAC = BAC/CPI
Estimate to Complete (ETC)
ETC = EAC – BAC
Earned Value Analysis
To-Complete Performance Index (TCPI)
Is calculated projection of cost performance,
must be achieved on the remaining work
That is ratio between remaining work and
funds remaining
TCPI = (BAC-EV)/(BAC-AC)
Earned Value Management 4/3/2011
PMP Prep Course 12
Earned Value Analysis
A $10,000 software project is scheduled
for 4 weeks.
At the end of the third week, the project is
50% complete and the actual costs to
date is $9,000
Planned Value (PV) = $7,500
Earned Value (EV) = $5,000
Actual Cost (AC) = $9,000
Earned Value Analysis
Schedule Variance= EV – PV = $5,000 – $7,500 = - $2,500
Schedule Performance Index (SPI)= EV/PV = $5,000 / $7,500 = 0.66
Cost Variance= EV – AC = $5,000 - $9,000 = - $4,000
Cost Performance Index (CPI)= EV/AC = $5,000 / $9,000 = 0.55
The metrics indicate the project is behind scheduleand over budget.
On-target projects have an SPI and CPI of 1 or greater
Earned Value Management 4/3/2011
PMP Prep Course 13
Earned Value Analysis
If the project continues at the current
performance, what is the true cost of the
project?
Estimate At Complete
= Budget At Complete (BAC) / CPI
= $10,000 / 0.55 = $18,181
At the end of the project, the total project
costs will be $18,181
Earned Value AnalysisFormulas to recap:
SCHEDULE COST
SV = EV – PV
SV = BCWP – BCWS
CV = EV – AC
CV = BCWP – ACWP
SPI = EV / PV
SPE = BCWP / BCWS
CPI = EV / AC
CPI = BCWP / ACWP
CSI = CPI * SPI EAC = BAC / CPI
TCPI = (BAC-EV)/(BAC-AC) ETC = EAC - BAC
Earned Value Management 4/3/2011
PMP Prep Course 14
Questions ?