Earned Value Management

How to apply Earned Value Management to

measure the Performance of your Project

alphaPM Inc. www.alphaPM.com

2

PROJECT MILESTONESPlanned

DatePlanned

DateNotes

Develop Strategy and Vision      

Establish Readiness and Blueprint      

Identify Business and User Goals      

Document Project Scope      

Prepare Detailed Requirements      

Build and Test      

Launch      

Project Issues/Risks Mitigating Actions To Be Taken

                     

Project Performance Tracking (Project Dashboard)

How To Earned Value Management Overview

Earned Value Management (EVM) is a management methodology for integrating scope, schedule and resources, and for objectively measuring project performance and progress.

Performance is measured by determining the budgeted cost of work performed (i.e. earned value) and comparing it to the actual cost of work performed (i.e. actual cost).

Progress is measured by comparing the earned value to the planned value.

Source: A Guide to the Project Management Body of Knowledge (PMBOK Guide) Third Edition 2004

Example:

Project Budget: $400K

Project Schedule: 4 months (= Baseline Duration)

At the 3 month checkpoint:

Spent: $200K

Work completed: $100K

Earned Value Management helps you to report how the project is doing in terms of cost and schedule?

Earned Value ManagementTerms and Formulas

Terms and Formulas Alternative Definition

Earned Value (EV) Budgeted Cost of Work Performed (BCWP)i.e. the budgeted cost to date x % complete

Actual Cost (AC) Actual Cost of Work Performed (ACWP)

i.e. actual cost of work performed to date

Planned Value (PV) Budgeted Cost of Work Scheduled (BCWS) i.e. the estimated value of work to be performed

Cost Variance (CV)= EV - AC

Budgeted Cost of Work Performed (BCWP) - Actual Cost of Work Performed (ACWP)

Schedule Variance (SV)= EV - PV

Budgeted Cost of Work Performed (BCWP) - Budgeted Cost of Work Scheduled (BCWS)

Cost Performance Index (CPI) = EV/AC

Budgeted Cost of Work Performed (BCWP)/ Actual Cost of Work Performed (ACWP)

Schedule Performance Index (SPI) = EV/PV

Budgeted Cost of Work Performed (BCWP)/Budgeted Cost of Work Scheduled (BCWS)

Example

$100K

$200K

$300K

$100K – $200K = ($100K)

$100K - $300K= ($200K)

$100K/$200K= 0.5 i.e. 50%

$100K/$300K= 0.33 i.e 33%

Example:Project Budget: $400KProject Schedule: 4 months

At the 3 month checkpoint:Spent: $200KWork completed: $100K

Revised Total Duration Baseline Duration/Schedule Performance Index4/0.33

= 12 months

0

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400

500

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J F M A M J J A S O N D

Budget

3 MonthCheckpoint

PV

Earned Value ManagementChart for project example

Actual Cost

Earned Value

CV = EV – AC = (100K)

SV = EV – PV = (200K)

CPI = EV/AC = (50%)

SPI = EV/PV = (33%)

Example:

Project Budget: $400K

Project Schedule: 4 months

At the 3 month checkpoint:

Spent: $200K

Work completed: $100K

Revised Total Duration = Baseline Duration/SPI = 4/0.33 = 12 months

How To Exercise

Report the Performance for the Project at the 10 day point. (Assume a labour rate of $1,000/day)

Step 1: Determine the value of the three variables needed to measure the project performance at the 10 day point (all activities are sequential)

Planned Value: PV =

Earned Value: EV =

Actual Cost AC =

Click here when youhave your answer

Planned Value: PV = $10,000 {2,000 + 4,000+ 4,000 since Jim should have completed 4 days of coding at the 10 day point}

Earned Value: EV = $9,000 {2,000 + 4,000 + 3,000 since Jim is only 30% complete}

Actual Cost: AC = $12,000 (4,000 + 3,000 + 5,000 since that is the actual amount that all have spent}

Activities Owner Planned Effort

(Days)

Budget(Planned Value)

$

ActualEffort

(As of Day 10)

Actual Cost(As of Day 10)

$

Status

(As of Day 10)

Prepare Plan John 2 $2,000 4 $4,000 Completed

Design Solution Susan 4 $4,000 3 $3,000 Completed

Code Programs Jim 10 $10,000 5 $5,000 30% of all work completed

Test Programs Debbie

2 $2,000 Not started

Deploy into Production Brad 2 $2,000 Not started

Total 20 $20,000

How To Exercise (continued)

Report the Performance for the Project at the 10 day point. (Assume a labour rate of $1,000/day)We now know that Planned Value (PV) = $10,000

Earned Value (EV) = $ 9,000 Actual Cost (AC) = $12,000

Step 2: Calculate the Earned Value Performance Indices

Cost Performance Index (CPI): CPI = EV/AC

Schedule Performance Index (SPI): SPI = EV/PV

Click here when youhave your answerCost Performance Index (CPI): CPI = EV/AC = $9.000/$12,000 = 0.75 or 75%

Schedule Performance Index (SPI): SPI = EV/PV = $9,000/10,000 = 0.90 or 90%

Activities Owner Planned Effort

(Days)

Budget(Planned Value)

$

ActualEffort

(As of Day 10)

Actual Cost(As of Day 10)

$

Status

(As of Day 10)

Prepare Plan John 2 $2,000 4 $4,000 Completed

Design Solution Susan 4 $4,000 3 $3,000 Completed

Code Programs Jim 10 $10,000 5 $5,000 30% of all work completed

Test Programs Debbie

2 $2,000 Not started

Deploy into Production Brad 2 $2,000 Not started

Total 20 $20,000

8

PROJECT MILESTONESPlanned

DatePlanned

DateNotes

Develop Strategy and Vision      

Establish Readiness and Blueprint      

Identify Business and User Goals      

Document Project Scope      

Prepare Detailed Requirements      

Build and Test      

Launch      

Project Issues/Risks Mitigating Actions To Be Taken

                     

Project Performance Tracking (Project Dashboard)

An Easy Way to Remember the Formulas

Fou

r F

orm

ulas

S

C

S

C

Three Variables: EV PV AC

An Easy Way to Remember the Formulas

Three Variables: EV PV AC

Fou

r F

orm

ulas

SV

CV

SPI

CPI

EV

EV

EV

EV

-

-

=

=

=

=

/

/

P

A

P

A

An Easy Way to Remember the Formulas

Three Variables: EV PV AC

Fou

r F

orm

ulas

SV

CV

SPI

CPI

EV

EV

EV

EV

-

-

=

=

=

=

/

/

PV

AC

PV

AC

Earned Value Management

How to apply Earned Value Management to

measure the Performance of your Project

alphaPM Inc. www.alphaPM.com