EARNED VALUE ANALYSIS

“Cost / Schedule System”

BY: -
Hakeem–Ur–Rehman
IQTM–PU

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 Budget
Variance

Spend more to Under

catch up Good Shape

C On Critical Path
A

E Schedule
Variance
Behind Ahead

D B Slow the efforts

to save money
Rescope
Over

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EARNED VALUE ANALYSIS
“Earned Value Analysis” is:
• an industry standard way to:
• measure a project’s progress,
• forecast its completion date and final cost, and
• provide schedule and budget variances along the
way.

By integrating three measurements, it provides

consistent, numerical indicators with which you can
evaluate and compare projects.

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WHAT’S MORE IMPORTANT?

Knowing where you are

on schedule?

Knowing where you are

on budget?

Knowing where you are

on work accomplished?

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EARNED VALUE ANALYSIS
BCWS: “Budgeted Cost of Work Scheduled”
“Also Know as Planned budget value of the work
scheduled (PV).”

 This is the total budgeted cost up to the analysis date.

 It answers the question “how much did we plan to

spend as of this date?” A variant of this question is
“how much work should have been completed by this
date?”

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EARNED VALUE ANALYSIS
ACWP: “Actual Cost of Work Performed”
Actual cost required to complete all or some portion of
the tasks, up to the status date.

It answers the question “how much have we actually

spent?”. This is usually determined from the
organization’s accounting system, or can often be
approximated by multiplying the number of people by
the number of hours or days or weeks worked.

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EARNED VALUE ANALYSIS
BCWP: Budgeted Cost of Work Performed
EV (EARNED VALUE)

 The value of the work performed by the status date,

measured in currency. This is literally the value earned
by the work performed and is called the budgeted cost
of work performed (BCWP).

 It answers the question “how much work has actually

been completed?”

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 SOME DERIVED METRICS
SV: Schedule Variance (BCWP-BCWS) = (EV – PV)
 A comparison of amount of work performed during a
given period of time to what was scheduled to be
performed.
 If it is 0, you are right on schedule.
 If it is negative, you are behind schedule.
 If it is positive, you area ahead of schedule.

CV: Cost Variance (BCWP-ACWP) = (EV – AC)

 A comparison of the budgeted cost of work performed
with actual cost.
 If it is 0, you are right on budget.
 If it is negative, you are over budget.
 If it is positive, you area under budget. 8
SOME MORE DERIVED METRICS

SPI: Schedule Performance Index

SPI=BCWP/BCWS=EV/PV
 If it is 1, you are right on schedule.
 If it is less than 1, you are behind schedule.
 If it is greater than 1, you are ahead of schedule.

CPI: Cost Performance Index

CPI= BCWP/ACWP
 If it is 1, you are right on budget.
 If it is less than 1, you are over budget.
 If it is greater than 1, you are under budget.

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 EXAMPLE:
EARNED VALUE ANALYSIS
Suppose you are making cookies for a large party to be held
tomorrow.
Suppose the following are your plans:
 Plans:

 40 cookies per batch

 5 batches per hour (200 cookies)
 Schedule: 5 hours to make a total of 1000 cookies
 Budgeted cost per cookie is $0.05
 Total budget is $50.00 for cookie ingredients, or $10 per hour
We'll use earned value to examine our progress.

PROGRESS REPORT AT END OF HOUR 1:

150 edible cookies have been made (some were burnt and had to be
thrown away)
Total actual cost of ingredients used so far is $9.00 (ACWP)
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 EXAMPLE:
EARNED VALUE ANALYSIS
ANALYSIS:
 PV=BCWS = $10.00

 EV=BCWP = $7.50(Earned Value)[150 cookiesx0.05 per cookie]

 ACWP = $9.00 [from above]

Therefore:
 SV = BCWP - BCWS = -$2.50 (you are behind schedule)

 SPI = BCWP / BCWS = 0.75 (you are running at 75% of the

planned schedule)
 CV = BCWP - ACWP = $7.50 - $9.00 = -$1.50 (you are $1.50

over budget)
 CPI = BCWP / ACWP = 0.833 (you are running over budget by

about 17%)

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 Estimate At Completion (EAC) The expected TOTAL cost required to finish
complete work. ACWP + ETC = EAC

Estimate to complete (ETC) The expected cost required to finish all the
REMAINING work. ETC= (BAC-EV)/CPI

Time to complete TC= (BAC-EV)/SPI

EAC = BAC /CPI Where: BAC = Sum of all BCWS

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 WORK SHOP
 A project has a budget of £10M and schedule for 10 months.
 It is assumed that the total budget will be spent equally each
month until the 10th month is reached.
 After 2 months the project manager finds that only 5% of the
work is finished and a total of £1M spent.
 Find the following:
 Variances: CV, SV
 Indices: CPI, SPI
 Forecasting: EAC, ETC, Time to completion

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 WORK SHOP
Solution:
PV = £2M
EV = £10M * 0.05 = £0.5M
AC = £1M
CV = EV-AC = 0.5-1 = -0.5M
SV = EV-PV = 0.5-2 = -1.5 months

CPI = EV/AC = 0.5/1 = 0.5

SPI = EV/PV = 0.5/2 = 0.25
EAC = BAC/CPI = 10/0.5 = £20M
ETC = (BAC-EV) / CPI = (10-0.5)/0.5 = £19M
Time to compete = (BAC – EV)/SPI = (10-0.5)/0.25 = 38 Months
This project will take TOTAL £20M (19+1) and 40 (38+2)
Months to complete. 14
EARNED VALUE ANALYSIS

Questions/Discussion

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