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Project Metrics: Tips for doing Earned

Value Analysis
Date: June 2nd, 2008
Author: Bill Stronge
Category: Project Management
Tags: Project, Project Manager, Analysis, Manufacturing, Bill Stronge

Being able to determine the success of a project seems to get more complex the larger the initiative
and broader the project scope. A large project may be partially successful because you were able to
deliver the agreed upon scope of work but maybe you missed on the projects duration or its budget.
Would you still consider this a success? The answer most likely is “It depends.” It could depend on
what the project sponsor thinks makes it successful or it could depend on what the project manager
thinks makes it successful. Spending some time in the early stages of the project contemplating this
question will help alleviate any potential confusion at the end and hopefully allow you project to
overall be more successful.

A quick primer before you begin

In general terms, Earned Value Management (EVM) is the way that we can track and measure the
performance of a project against the baseline that has been created for that same project.

A quick primer before you begin

You can start to decipher your EVM by knowing about your project the terms shown in Table A:

Table A

Acronym Description
PV Planned Value The budgeted amount
which has been assigned
to the scheduled work
which needed to
completed for each
activity and/or
component. It is also
know as the Budgeted
Cost of Work Scheduled
(BCWS)
AC Actual Cost The total costs of the work
that was performed on the
project. It is also known as
the Actual Cost of Work
Performed (ACWP)
BAC Budget at Completion The originally budgeted
amount for the project.
Also know as the baseline

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Project Metrics: Tips for doing Earned Value Analysis | IT Leadership | T... http://blogs.techrepublic.com.com/tech-manager/?p=520
Also know as the baseline
cost.

Now that you’re familiar with the terms and basic formulas, Table B shows the more complex ones
that will help you determine whether your project is on track.

Remember this when calculating these formulas: If you’re calculating a variance, you are normally
using 0 as your center point so any negative numbers are bad news while positive numbers are good
news. When calculating against an index, being on target is how close your results are to 1. Lower
than 1 is bad while higher than 1 is good.

Table B

Acronym Formula Overview

EV Earned Value EV =BAC * Percent
This is the value
of Project
that had been
Completed
planned to be spent
to all work which
has already been
completed to date.
CV Cost Variance CV = EV - AC You calculate your
CV when you want
to determine
whether or not you
are under/over
budget.
SV Schedule Variance SV = EV - PV SV helps you
determine if your
project is ahead of
schedule or behind.
CPI Cost Performance CPI = EV / AC This is used when
Index you want to
determine if you
are spending your
money well on the
project. For every
dollar you spend
you should
understand if it is
helping you achieve
your projects goal.
SPI Schedule SPI = EV / PV Another view used
Performance Index to determine when
you are ahead of or
behind schedule
versus your plan.
EAC Estimate at EAC = BAC / CPI There are multiple
Completion EAC = AC + ETC ways to calculate
EAC = AC + (BAC - your EAC based on
EV) your situation. In

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Project Metrics: Tips for doing Earned Value Analysis | IT Leadership | T... http://blogs.techrepublic.com.com/tech-manager/?p=520
EV) your situation. In
the end it is used to
determine what
they final cost may
be at any point in
time of your project
ETC Estimate to ETC = EAC - AC Your ETC will help
Complete you understand
how much more it
will cost to finish
the project based
on your current
status.
VAC Variance at VAC = BAC - EAC The total variance
Completion (positive or
negative) in dollars
of your project
budget versus the
amount originally
budgeted.

In the beginning deciphering the difference between each of these can seem like a burden to a new
project manager but after going through it a few times it’ll become quite simple. Keeping up with
your project and its associated metrics will allow you to have a greater awareness of your project
status.

Bill Stronge is a PMP certified Project Manager with a Global CPG organization currently focusing
on eBusiness projects. During his 14+ years he has worked on enterprise wide applications in both a
developer and architect role as well as a project manager leading teams of various sizes. He can be
reached for questions at wstronge@hotmail.com.

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