Earned Value Management (EVM)

Definition

The use of an integrated management

system that coordinates work scope,
schedule, & cost goals & objectively
measures progress toward these goals.
 Earned Value
Management
Program at a Glance
Over EAC
Total Allocated Budget Budget

Management Reserve
P
Raleigh R
Distribution PMB O
J
E
C
T
E
D
$ S
L
BCWPC I
BCWSC P
P
ACWPC A
G
E

Time Completion
Now Date
 “Objectively Measures Performance”

• Performance Measurement
Assessing the progress of acquisition
programs against cost, schedule and technical
standards
• Earned Value
Measuring work performed in terms of the budget
assigned to that work
 Traditional Measurement
PLANNED ACTUAL COST
2 2

= $15
10 10

5 5 5 5
= $25

3 3
BUDGET = $50 COST = $40

STATUS: Variance = Budget - Actual = + $10 Favorable

 Earned Value Measurement

PLANNED PERFORMED ACTUAL COST

2 2 2 2
= $15
10 10 10 10

5 5 5 5 5 5 5 5
= $25

3 3 3 3
BUDGET = $50 EARNED = $35 COST = $40
STATUS: Schedule Variance = Earned - Budget = -15Unfavorable
Cost Variance = Earned - Actual = - 5Unfavorable
 Earned Value Terminology
Acronym Term Meaning
BCWS Budget Cost of Work Scheduled Baseline - PMB
BCWP Budget Cost of Work Performed Earned Value
ACWP Actual Cost of Work Performed Actuals
BAC Budget At Completion Planned Cost
EAC Estimate At Completion Forecasted Cost
Accomplishment
SV Schedule Variance
Variance
CV Cost Variance Planned vs Actual
Cost
VAC Variance At Completion Forecasted
Overrun / Underrun
 The Performance
Measurement Baseline
 The time-phased budget plan against which
contract performance is measured.

Contract Price - Profit / Fee =

Total Allocated Budget

Management Reserve

PMB

BCWS C

Time
Completion
Now
Date
 Developing the PMB
1. Scope 1. Identify SOW
2. Extend WBS to
control account
Reports
work package

Negotiated Contract Cost

1. Arrange work
2. Schedule packages in order MR
2. Sequence over time
$

3. Budget 1. Budget the work packages PMB

100 2. Classify the work and select
40 an EV technique
60 3. Calculate cumulative BCWS

Time
 COMMON SCHEDULE PRESENTATIONS
ID
1
Task Name Dec
AWARD
Jan Feb Mar
1997
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Milestone Chart: Provides key events
2 SDR or completion points of activities.
3 PDR
Used as objectives or output of a network.
4 CDR

5 DTE
Needs to show baseline & current
6 Delivery
projection.

Gantt Chart: Provides duration & ID

'97
Task Name T F S S M
Jan 26, '97
T W T F S S M
Feb 2, '97
T W T F S S M
Feb 9, '97
T W T F S S M
Feb 16, '97
T W T

relative time location of activities. 1

2
Task 1

Task 2

Used to show progress against tasks & 3

4
Task 3

Task 4

projected slips. 5 Task 5

Task 2 Task 4

2 5d 4 5d
1/31/97 2/6/97 2/7/97 2/13/97

Task 1
Task 5
Network (pert): Shows order of the activities.
1
1/24/97
5d
1/30/97 5 5d Generally does not clearly show time location or
Task 3 2/14/97 2/20/97

3 5d
amount completed (start / finish).
1/31/97 2/6/97
CRITICAL PATH = 0 FLOAT

MS Project ‘combines’ these features.

 EARNED VALUE TECHNIQUES
METHOD LENGTH BCWP CALCULATION
0 / 100 % 1 Mth 0 30

50 / 50 % 2-3 Mths 15 15

% Complete Varies 35%

Variant
3 or More Mths 5 15 10
Milestone
Level of Effort Varies 10 10 10

Apportioned 5%WP3 5%WP3

Varies
Effort
 Let’s Walk Through an Example

Project WBS
Design

Manufacture

Component Test

Assemble

Integrated Test
1. THE PLAN Work Plan
w
o
r
k
s
c
o
p
e $
Time Period
1. THE PLAN Budget Plan
w
o
2 4 2
r
k
2 2 2
s 2
c
o 1 1 1 1
p
e $ 20
Time Period
 Time-Phased Plan

BUDGETED COST
DEFINE SCHEDULE OF WORK
WORK SCHEDULED ($M)

Design 4

Manufacture 6

Component Test 4

Assemble 4

Integrated Test 2

0 2 4 6 8 10 12 14 16 18 20 $20
Months
 The Time-Phased Spend Plan
NEGOTIATED CONTRACT COST
22 Management
20
} Reserve

18
16
Budget at
14
Performance Completion
$ 12 Measurement BAC
10 Baseline
Cumulative
8 Budgeted PMB
6 Cost of Work
4 Scheduled
2 BCWS
0
0 2 4 6 8 10 12 14 16 18 20
Completion
Months Point
 EV in Program Execution

• Data Collection / Reporting

• Data Analysis
– Variances
– Performance Indices

• Estimates at Completion (EAC)

 Basic Performance
Data Analysis Objectives
• Determine current status
-- Where are we today?

• Identify trends
-- Where are we headed?
-- Any cost, schedule surprises ?

• Forecast the future

-- What is the estimated cost at completion?

• Indicate areas for management action

-- What should we do now?
 Earned Value Metrics

 Variances
 Cost and schedule
 Current month and cumulative

 Performance indices
 Cost Performance Index (CPI)
 Schedule Performance Index (SPI)
 Percent complete
 Percent spent
1. THE PLAN
Actual Costs
w
o 2 2
r
k 2 2 2
s
c 1 1 1 1
o
p
e $ 14
Time Period
2. ACTUAL COSTS

Labor Percent Spent =

8
Actual Cost = 13 = 65%
BAC 20
Material
5
$ 13

Time Period
 The Actual Cost

Budget Actual
Plan, Cost,
DEFINE SCHEDULE BCWS ACWP
WORK ($M) ($M)

Design 4 4
Manufacture 6 6

Component Test 4 3

Assemble

Integrated Test

0 2 4 6 8 10 12 14 16 18 20 $14 $13
Months (Now)
Actual Cost Imposed On The Spend Plan
NEGOTIATED CONTRACT COST
22 Management
20 } Reserve

18
16
14 Budget at
Completion
$ 12 (BAC)
10 BCWS
8
6
ACWP
4
2
0
0 2 4 6 8 10 12 14 16 18 20
Completion
Time
Months Point
Now
1. THE PLAN Earned Value3. WORK PERFORMED
w
o 2 2 2
r
k 2 2 2 2
2
s
c 1 1 1 1 1 1 1 1
o
p
e $ 14 $ 10
Time Period Time Period
2. ACTUAL COSTS 4. VARIANCES

Labor Schedule Variance = Performed - Plan

8 SV = $10 - ____
_______ $14
SV = -_______
$4
Material Cost Variance = Performed - Actuals
5 CV = $10 - ____
_______ $13
$ 13
CV = - $3
_______

Time Period
 Earned Value Current Status
Earned
Value
Performance
DEFINE SCHEDULE BCWS BCWP ACWP
WORK ($M) ($M) ($M)

Design 4 4 4
Manufacture 6 4 6

Component Test 4 2 3

Assemble

Integrated Test

0 2 4 6 8 10 12 14 16 18 20 $14 $10 $13

Months (Now)
SV CV
= =
-4 -3
 The Earned Value Current Status
Imposed On The Spend Plan
NEGOTIATED CONTRACT COST
22 }
Management
Reserve
20 BCWS
18
16
14 Budget at
$ 12
10
ACWP
}CV }SV
Completion
(BAC)

8
6
4 BCWP
2
0
0 2 4 6 8 10 12 14 16 18 20
Completion
Time
Months Point
Now
 Cumulative Dollar Variance
Cost and Schedule Trends
$ in Millions

1.0

(1.0)

(2.0)
CV
(3.0)

(4.0) SV
 Performance Metrics

• Cost Variance Percent Complete

= BCWP - ACWP = BCWP/BAC
= 10-13 = -3M = 10/20 = 50%
• Schedule Variance Percent Spent
= BCWP - BCWS = ACWP/BAC
= 10 - 14 = -4M = 13/20 = 65%
• Cost Performance Index Schedule Performance Index
= BCWP/ACWP = BCWP/BCWS
= 10/13 = .77 = 10/14 = .71

Estimate at Completion
BAC/CPI = 20/.77 = $26M
 Estimate at Completion
(EAC)

EAC = Actual Costs accumulated to date + Estimated

Cost of the Work Remaining

Budget at Completion = $20M

BCWS = $14M (Planned to date)

ACWP = $13M

BCWP = $10M (EV) Work Remaining

 Plot Performance Indices

1.3
1.2
1.1
1
0.9
0.8 CUM SPI
0.7
0.6 CUM CPI
0.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Nov