Earned Value Analysis

Presented By: Vijaya V Bhosale

Roll No.1510

Earned Value - What is it?

Simply, it is a project monitoring and

measurement system that:

establishes a clear relationship between planned
accomplishments and actual accomplishments
2. reinforces and rewards good planning practices
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Earned Value - What is it?

Basic concepts of Earned Value Management

(EVM)
Each task in a project earns value as planned work

is completed

For example (perhaps), if you were paid on this basis, you

would earn $$ at key milestones based on the value of what

you have completed (earned value)

Earned value can be compared to actual cost and

budgeted cost to determine variance and predict

future performance

Earned Value - What is it?

The budgeted cost (e.g., dollars, person-

hours, person-days, etc.) in terms of

your baseline plan/budget of the work
performed up to a specified point in time
Also known as Budgeted Cost of Work

Performed (BCWP)
BCWP

Each task in the Work Breakdown

Structure (WBS) is assigned a BCWP

based on its individual cost.
Project BCWP is total of BCWP for all tasks

required to complete the project

Earned Value Components

Planned Value (a.k.a. BCWS)
BCWS
How much work (person-hours) you planned to
have accomplished at a given point in time (this is
from the WBS in your plan)
Actual Cost (a.k.a. ACWP)
ACWP
How much work (person-hours) you have actually

spent at a given point in time

Earned Value (a.k.a. BCWP)
BCWP
The value (person-hours) in terms of your base
budget of what you have accomplished at a given
point in time (or, % complete X Planned Value)
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Earned Value: Example

Today

18
8
14

On Day X:
PLANNED VALUE (Budgeted cost of the work scheduled, BCWS) =

18 + 10 + 16 + 6 = 50
EARNED VALUE (Budgeted cost of the work performed, BCWP) =

18 + 8 + 14 + 0 = 40
ACTUAL COST (of the work performed , ACWP) =

45 (from your project tracking - not evident in above chart)

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Earned Value: Example

Cost (Person-Hours)

Actual Cost:
Cost what you
have actually spent to
this point in time.

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Planned Value:
Value what your
plan called for sending on
the tasks planned to be
completed by this date.

Today

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Earned Value:
Value value
(cost) of what you have
accomplished to date, per
the base plan.

Time (Date)
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Earned Value: Example

Cost (Person-Hours)

Today

Over
Budget

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Time (Date)
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Behind
Schedule

Variance
Any schedule or cost deviation from a specific

plan.
Used within an organization to verify the
budget and schedule for a project
Frequently used as a key component of plan
reviews and performance measurement

Variance
Must compare scheduling and budget variance

at the same time

Schedule variance:
variance deviations from work planned

not a measure of changes in cost

Cost variance:
variance deviations from the
budget not a measure of work scheduled vs.
work completed

Example: applying more $$/people to a task may maintain

the schedule, but it adds to cost schedule on track

over budget on expenses (cost)

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Performance Indices
Cost Performance Index
CPI = BCWP/ACWP

Schedule Performance Index

SPI = BCWP/BCWS

Analysis
CPI > 1.0 exceptional performance
CPI < 1.0 poor performance
Similar for SPI

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Earned Value & Variance:

Example
18
8
14

On Day X:
PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50
EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40
ACTUAL COST (ACWP) = 45 (from your project tracking)

Therefore:
Schedule Variance = BCWP BCWS = 40 - 50 = -10 (behind schedule)
Schedule Performance Index = 40 / 50 = 0.8, or 80% of plan (a B-, at best)
Cost Variance = BCWP - ACWP = 40 - 45 = -5
Cost Performance Index = 40/45 = .89, or youre getting an 89 return on

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every $1.00 (or, person-hour) spent on this project

Primary Measurement
Methods

Measurable efforts

Discrete increments of work with definable

schedule and tangible results (i.e., real tasks

with a deliverable)

Level of effort
Work that is not discernable in discrete,
discrete

measurable tasks (e.g., project management,

training)

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Determining % Complete
When?
Allocate based on time spent but what if

you spend more time than allocated?

Allocate 50% at start of task, 50% at end
But only for small, discrete tasks

Allocate 100% at start of task

Allocate 100% at end of task
Best solution if you keep tasks very small
Allocate value at Critical Milestones
Good solution when using with contract work
Others?
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Earned Value Management

How can you use this information?
Careful analysis of variance and trends
Resetting schedule or budget, when appropriate
Variance Analysis Questions
What is the problem causing the variance?
What is the impact on time, cost and

performance?
What is the impact on other efforts, if any?
What corrective action is planned or under way?
What are the expected results of the corrective
action?
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Earned Value Management

Extraordinary variance or alarming trends

may be cause for reset or cancellation of a

project, but where do you draw the line?
How much variance to allow depends on a
number of factors:
Life-cycle phase
Length of life-cycle phase
Length of project
Type of estimate
Accuracy of estimate
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Variance Projection

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Performance Index Trends

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Ideal Performance Index

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Closing Thoughts: Management

Reserve
The padding always added to a project for

unexpected costs that are within project

scope
Not an allowance for changes to scope
Not part of the cost estimate

Added by upper management, not the

project manager.

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Closing Thoughts: Government

Requirements
U.S. government contract cost tracking

often must include:

BCWS
BCWP
ACWP
Estimated cost at completion
Budgeted cost at completion
Cost and schedule variances with

explanations
Traceability
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Thank You

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