Earned Value Management[EVM]

• EVM is used in planning, management and control of projects and programs
• It is a project management budgeting technique measuring cost and schedule against a baseline
• The result is a simple set of metrics that provide early warnings of performance issues and allows for timely and appropriate adjustments to be made

Earned Value Equations

• Total budget cost for the project OR Budget at completion (BAC)

  • Original budget of the project

    BAC = Given

• Planned Value (PV)

  • This is the budgeted cost of work that is scheduled to be done at a given point in time
  • This is the amount of money worth of work that should have been done till now

    PV = Budgeted Cost of work X Planned completion

• Earned Value (EV)

  • Budgeted cost of work which is actually performed at any given point of time
  • Amount of money worth of work that has actually been done on the project

    EV = Budgeted cost of work X Actual % Complete

• Actual Cost (AC)

  • This is the actual cost that is incurred for all of the work that is performed at any given point of time
  • money spent on the project so far

    **AC = Given **

• Cost variance (CV)

  • Difference between actual work done and money spent
  • Difference between earned value and actual cost
  • Negative value means we are over budget

    CV = EV - AC

• Cost Performance Index (CPI)

  • Rate of how we are spending to actually earning on the project
  • Measure of cost efficiency
  • Value under 1 means we are over budget

    CPI = EV / AC

• Schedule Variance (SV)

  • Difference between the amount of work done against the amount of work that should have been done
  • Difference between earned value and the planned value
  • Negative value means we are behind schedule

    SV = EV - PV

• Schedule Performance Index (SPI)

  • Rate of how we are meeting project schedule
  • Measure of schedule efficiency
  • Value under 1 means we are behind schedule

    SPI = EV / PV

• Estimate at Completion (EAC)

  • Forecasting the total value cost of the project at the end based on the current rate of spending

    EAC = BAC / CPI

• Estimate to complete (ETC)

  • Forecasting the amount that will be needed to complete the current project based on the current performance

    ETC = EAC - AC

• Variance at completion (VAC)

  • Difference between original budget and new forcasted budget
  • If positive, it means under budget

    VAC = BAC - EAC

• To-complete Performance Index (TCPI)

  • Performance that needs to be met to complete the project within the budget
  • Number above 1 means team needs to work harder than currently to finish the project

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

Scenario 1 BAC = $100 Duration 5 days PV = $60 EV = 75% X 100 = $75 AC = $70

Cost Variance (CV) = 75 - 70 = 5 (Under Budget) CPI = 1.07 Schedule Variance (SV) = 75% - 60% = 15% (Ahead of schedule) SPI = 1.25 EAC = 100 / 1.07 = 93.45 ETC = 93.45 - 70 = 23.45

VAC = 6.55 TCPI = 25/30 = 0.83

Scenario 2 BAC = $4000 Duration = 4 years = 48 months Completed = 17 months PV = 17/48 X 4000 = 1417 EV = 0.35 X 4000 = 1400 AC = 1500 CV = -100 Over budget CPI = 1400/15000 = 0.93 Over budget SV = 1400 - 1417 = -17 behind schedule SPI = 1400/1417 = 0.98 = behind schedule EAC = 4000/0.93 = 4301 ETC = 2801 VAC = -301 TCPI = 1.04