Earned Value Management

Pranay Srivastava Mar 2008

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

EVM History
1967 1987 1997 1998 DoD Instruction Cost/Schedule control system criteria PMI recommends EVM DoD Regulation 5000.2R on EVM ANSI/EIA 748 adopts EVM.

What is EVM
Best practices focusing on process, people & tools for project tracking and control Integrates
Technical performance (status of work) Schedule performance Cost performance

When used to its full extent, it allows

Measuring performance Analyzing variance Developing forecasts.

Advantages of EVM
Easy to understand Low overhead Integrates cost and schedule Based on results Simplifies status reporting Reliable prediction Well proven.

Disadvantages of EVM
Doesnt address critical path Deterministic Can drive wrong behavior Doesnt account quality Cant handle management reserves Doesnt reveal the cause.

Type Of Data
Base Data
Data ONLY for the current period

Summary Data
Derived data based on the base data Rolled-up data till date Indicates the current health of the project

Forecast Data
Project forecast/estimate based on summary data.

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

Base Data
Total Budget (BAC)
Total planned value for the project

Planned value (PV)

Estimated effort/cost for all tasks planned to be completed in the period

Earned value (EV)

Planned effort/cost for all tasks completed during the period.

Base Data
Actual Cost (AC)
Actual effort/cost incurred on all tasks completed during the period

Total Spent (TS)

Actual effort/cost incurred on all tasks to date, regardless of whether the task has been completed or not.

Base Data
Assume today is 22nd Feb; Task A, B, C, D are complete, E is in-progress, and F not yet started
Task A B C D E F Total Schedule Date 1-Feb-2008 5-Feb-2008 10-Feb-2008 15-Feb-2008 20-Feb-2008 25-feb-2008 PV 5 10 5 10 5 10 EV AC TS 5 14 7 13 3*

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

Summary Data
Cost Variance (CV)
Difference between Earned Value and Actual Cost i.e. EV AC

Cost Performance Index (CPI)

Ratio of Earned Value and Actual Cost (EV/AC) <1.0 indicates project will be over budget >1.0 indicates project will be under budget = 1 indicates project will finish on-budget.

Summary Data
Schedule Variance (SV)
Difference between Earned Value and Planned Value i.e. EV PV

Schedule Performance Index (SPI)

Ratio of Earned Value and Planned Value (EV/PV) <1.0 indicates project will be delayed >1.0 indicates project will finish before time = 1 indicates project will finish on-time.

Summary Data - Emerging Trend

Why required
SV/SPI are measure of work scope not time At end of project, SV = 0 & SPI = 1

Time Based Schedule Variance

Difference between Planned Time and Actual Time SV(t) = Planned Time Actual Time

Time Based Schedule Performance Index

Ratio of Planned Time and actual Time SPI(t) = Planned Time / Actual Time

Summary Data
Assume today is 22nd Feb; Task A, B, C, D are complete; E is in-progress, F not yet started
Task A B C D E F Total PV EV AC TS CV CPI SV SPI

5 10 5 10 5 10

5 14 7 13 3*

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

Forecast Data
Estimate To Complete (ETC)
Estimated effort/cost to complete all pending scheduled tasks Project ETC
Team's estimate of effort/cost required to complete all scheduled tasks (valid when earlier estimations are no longer valid)

Statistical ETC
ETC = (BAC EV) assuming similar variance will not occur in future ETC = (BAC-EV)/CPI assuming similar variance will occur in future.

Forecast Data
Estimate At Completion (EAC)
Estimated effort/cost incurred to complete all scheduled tasks Project EAC
Team's estimate of total effort/cost to complete all scheduled tasks Project EAC = Total Spent + Project ETC

Statistical EAC
EAC = Actual Cost + (BAC-EV) EAC = Actual Cost + (BAC-EV)/CPI.

Forecast Data - Emerging Trend

Future cost performance is assumed to be same as past 3 periods cost performance EAC = AC + ( BAC - EV)/ ((EVi+EVj+EVk)/ACi+ACj+ACk) Future cost performance is assumed to be also influenced by schedule performance EAC = AC + ( BAC - EV)/ (CPI*SPI) Future cost performance is assumed to be influenced by both cost & schedule performance in some ratio (x,y) EAC = AC + ( BAC - EV)/ (x CPI + y SPI)

Forecast Data - Emerging Trend

Time Estimate At Completion (EACT)
Approx time incurred to complete all scheduled tasks An emerging trend in EVM that uses timebased measure of schedule as an alternative or supplement to traditional work-based measure Statistical EACT
EACT = BAC/SPIat current trend.

Forecast Data
Variance At Completion (VAC)
Forecasted variance between Total Budget and Estimate At Completion Project VAC
Team's forecasts of difference between budgeted and actual cost for all tasks Project VAC = Total Budget - Project EAC

Statistical VAC
Statistical VAC = Total Budget - Statistical EAC.

Forecast Data
To Complete Performance Index (TCPI)
Forecasts how efficient the project team needs to be to complete the project on budget TCPI = (Total Budget Earned Value) _________________________ (Total Budget Actual Cost)

Forecast Data
Assume today is 22nd Feb; Task A, B, C, D are complete; E is in-progress, F not yet started
Task A B C D E F Total PV AC CPI SPI ETC EAC VAC TCP I

5 10 5 10 5 10

5 14 7 13 3*

Agenda
Earned Value Management
EVM Introduction Base Data Summary Data Forecast Data EVM in Practice.

Steps in using EVM

Develop task level Budget Take corrective action Record task level usage

Measure physical progress

Report performance

Analyze & Forecast performance

How EVM helps in Time management?

Are we ahead/behind schedule?
Schedule Variance

How efficiently are we using time?

Schedule Performance Index

When are we likely to finish work?

Time Estimate at Completion.

How EVM helps in Cost management?

Are we under/over budget?
Cost Variance

How efficiently are we using resource?

Cost Performance Index

What is the project likely to cost?

Estimate At Completion

What will the remaining work cost?

Estimate To Complete

How much under/over budget will we be at end of project?

Variance At Completion.