EARNED VALUE MANAGEMENT

www.synergysbs.co.in
 SECTION – 6

CHAPTER – 7(a)

www.synergysbs.co.in
 Earned Value
Management
Earned Value
Analysis Concepts
www.synergysbs.co.in
 Earned Value Analysis

“The rabbit wouldn’t have lost the race if

someone informed about its performance time
to time…”

From old story of Rabbit & Tortoise

www.synergysbs.co.in
 Earned Value Analysis
What is EVA?

EVA is basically a methodology to track

1. Project Schedule Performance
2. Project Cost Performance
3. Project Progress

www.synergysbs.co.in
 Earned Value Analysis

Project Schedule Performance

to measure project schedule performance and

determine time to complete project i.e. measuring
what is completed to date what is expected to
complete

www.synergysbs.co.in
 Earned Value Analysis

Project Cost Performance

to measure how much is spent against what is

expected to be spent

www.synergysbs.co.in
 Earned Value Analysis
Benefits of EVA
For project managers
 Reliable project costs and schedule data for
more effective decision making
 The relationship between cost, schedule and
work achieved
 Ability to avoid last-minute “surprises”
 Early identification of potential problems
 Accurate prediction of project costs at
completion

www.synergysbs.co.in
 Earned Value Analysis
Benefits of EVA
Provide ability to answer
 What did we get for money spent
 How much will the project cost to
complete
 When will the project be complete
 Which activities are contributing to the
cost overrun
 Which resources contributing to the
schedule slippage

www.synergysbs.co.in
 Earned Value Analysis
Planned Value (PV):- PV tells you what you plan to do.
Planned Value = Physical Work + Approved Budget

PV, also known as Budgeted Cost of Work Scheduled

(BCWS)
PV is categorized as:
Cumulative PV is the sum of the approved budget for
activities scheduled to be performed to date.
Current PV is the approved budget for activities
scheduled to be performed during a given period.

www.synergysbs.co.in
 Earned Value Analysis
PV example
We are working on a Client/Server project, and part of
the scope is for Software Design. The time frame is 5
months and the budget for this scope is $15,000,
resulting in a budget of $3,000 per month.

Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

What is current and As on today

cumulative PV?
www.synergysbs.co.in
 Earned Value Analysis
The Cumulative PV is the total for the elapsed
months: January – March. The cumulative PV is
$9,000.
The Current PV is the budget for the current
month, March, and equals $3,000.

Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

As on today

www.synergysbs.co.in
 Earned Value Analysis
Budget at Completion (BAC)
BAC is the sum of all budgets allocated to a
project scope.
 BAC can be obtained by work packages
 The Project BAC must always equal the
Project Total PV.
 If they are not equal, your earned value
calculations and analysis will be inaccurate.

www.synergysbs.co.in
 Earned Value Analysis
What is the BAC for this project if Software Design
is the complete scope of the project?
Client/Server project – Software Design

Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000

As on today
 Yes, BAC = $15,000. And, in keeping with the
previous points about BAC
 The project BAC equals the Project
Total PV.
 The Earned Value calculations are
correct.
www.synergysbs.co.in
 Earned Value Analysis
Actual Cost (AC), also called actual expenditures, is
the cost incurred for executing work on a project..
AC is also called Actual Cost of Work Performed
(ACWP).
 Cumulative AC is the sum of the actual cost for
activities performed to date.
 Current AC is the actual costs of activities
performed during a given period.

www.synergysbs.co.in
 Earned Value Analysis
Cumulative AC is the sum of the actual cost for
activities performed to date, and Current AC is the
actual costs of activities performed during a given
period. Client/Server project – Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 900 1200

As on today
 The Cumulative AC is the total for the elapsed
months: January – March. The Cumulative AC is
$3,200.
 The Current AC is the actual cost for the current
month, March, and equals $1,200.
www.synergysbs.co.in
 Earned Value Analysis
Earned Value (EV), is the quantification of the
“worth” of the work done to date.
EV tells us, in physical terms, what the project has
accomplished.
EV is also called Budgeted Cost of Work Performed
(BCWP).
 Cumulative EV is the sum of the budget for the
activities accomplished to date.
 Current EV is the sum of the budget for the activities
accomplished in a given period.

www.synergysbs.co.in
 Earned Value Analysis
Earned Value example
Client/Server project – Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 900 1200
EV 800 1300 1000 As on today

 The Current EV is the sum of the budget for

the activities accomplished in the current
month, March, and equals $1,000.
 The Cumulative EV is the sum of the budget for
the activities accomplished to date: January –
March. The cumulative EV is therefore $3,100.

www.synergysbs.co.in
 Earned Value Analysis
Client/Server project – Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
AC 1100 900 1200
EV 800 1300 1000 As on today

Cum PV = $9,000 Current PV = $3,000

BAC = $15,000
Cum AC = $3,200 Current AC = $1,200
Cum EV = $3,100 Current EV = $1,000

www.synergysbs.co.in
 Earned Value Analysis

Budget At
Completion
Actual Cost (BAC)
(AC) Planned Value
(PV)

Earned Value
(EV)

As On Date

www.synergysbs.co.in
 Earned Value Analysis
Schedule Variance (SV) = (BCWP – BCWS) = (EV – PV)
1. A comparison of amount of work performed
during a given period of time to what was
scheduled to be performed.
2. A negative variance means the project is behind
schedule

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

1. A comparison of the budgeted cost of work
performed with actual cost.
2. A negative variance means the project is over
budget.

www.synergysbs.co.in
 Earned Value Analysis
Schedule Performance Index (SPI)
SPI=BCWP/BCWS = EV/PV
SPI<1 means project is behind schedule

Cost Performance Index (CPI)

CPI= BCWP/ACWP = EV/AC
CPI<1 means project is over budget

Cost Schedule Index (CSI)

CSI=CPI x SPI
The further CSI is from 1.0, the less likely project
recovery becomes.

www.synergysbs.co.in
 Earned Value Analysis
To-Complete Performance Index (TCPI)

 Is calculated projection of cost performance,

must be achieved on the remaining work

 That is ratio between remaining work and

funds remaining

 TCPI = (BAC-EV)/(BAC-AC)

www.synergysbs.co.in
 Earned Value Analysis
A $10,000 software project is scheduled for 4 weeks.
At the end of the third week, the project is 50%
complete and the actual costs to date is $9,000

Planned Value (PV) = $7,500

Earned Value (EV) = $5,000
Actual Cost (AC) = $9,000

www.synergysbs.co.in
 Earned Value Analysis
Schedule Variance
= EV – PV = $5,000 – $7,500 = - $2,500
Schedule Performance Index (SPI)
= EV/PV = $5,000 / $7,500 = 0.66
Cost Variance
= EV – AC = $5,000 - $9,000 = - $4,000
Cost Performance Index (CPI)
= EV/AC = $5,000 / $9,000 = 0.55
The metrics indicate the project is behind schedule
and over budget.
On-target projects have an SPI and CPI of 1 or
greater
www.synergysbs.co.in
 Earned Value Analysis
 If the project continues at the current
performance, what is the true cost of the
project?
 Estimate At Complete
= Budget At Complete (BAC) / CPI
= $10,000 / 0.55 = $18,181
At the end of the project, the total project costs
will be $18,181 .

www.synergysbs.co.in
 Earned Value Analysis
Formulas to recap:
SCHEDULE COST
SV = EV – PV CV = EV – AC
SV = BCWP – BCWS CV = BCWP – ACWP

SPI = EV / PV CPI = EV / AC
SPI = BCWP / BCWS CPI = BCWP / ACWP
CSI = CPI * SPI EAC = BAC / CPI

www.synergysbs.co.in
 Questions ?
Lets take a quick test

www.synergysbs.co.in
THANK YOU

www.synergysbs.co.in